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American Credit Scores Sink To New Lows

From a blame-shifting Associated Press:

More Americans’ credit scores sink to new lows

By Eileen Aj Connelly, AP Personal Finance Writer Mon Jul 12, 2010

NEW YORK – The credit scores of millions more Americans are sinking to new lows.

Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.

So it looks like the ‘clamp down’ on loan requirements might have been a mistake. This would also indicate that the drop in consumer borrowing isn’t due to any increased ‘belt tightening.’ It’s because people just can’t get loans.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery

Once again, the lack of consumer spending is being blamed for the recession. Meanwhile, during the Bush years, out of control consumer spending was attacked by our news media as a crime against humanity on a near daily basis.

Still, how are Mr. Obama’s vaunted ‘financial reforms’ going to help this situation? (Hint: they aren’t. Indeed, they will probably only make things worse.)

FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years.

Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.

More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual’s score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.

On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown.

There’s also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.

This group is significant because it may feel the effects of lenders’ tighter credit standards the most, said FICO’s Jennings. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with mid-range scores that had been eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans

By the way, notice how the AP and other media outlets are now regularly using the expression, ‘The Great Recession.’ Even though, as bad as things are, the numbers still do not match what Ronald Reagan faced when he came into office.

And yet for some reason our media masters seem determined to make this recession seem so much more difficult than any we have suffered through before.

We suspect that they are trying to justify why it is taking Mr. Obama and the Democrats to pull us out of it — with their massive government spending. After all, Mr. Reagan’s tax cuts worked pretty darned quick.

This article was posted by Steve on Monday, July 12th, 2010. Comments are currently closed.

4 Responses to “American Credit Scores Sink To New Lows”

  1. wardmama4 says:

    First I have to wonder how many of those with crappy scores are 1) those who got into the housing market/credit via the forced ACORN loans via Freddie/Fannie via the sub-prime market scam who never would have paid ’em off ever, 2) are illegal and well see #1 and 3) todays youths who have to have the latest toys and brand new – with an entry level job?

    And of course the reality of more and more jobs disappearing/not being ‘created’ and more and more unemployed – just might add to the problem.

    And we also won’t mention that the credit card companies and their bastard step children (collection agencies) are working overtime with all the wonderful loopholes Congress has given them to make sure even the best borrower/credit holder – is shafted at every turn in the road with ever increasing (and confiscatory) rates and fees and penalties all guaranteed to insure that the loan/credit is never payed off in one lifetime – and any score is in the toilet – to insure even more confiscatory rates on any future loans/credit.

  2. jackal40 says:

    All the more reason to Not use credit for daily purchases – live within your means and you won’t have as many problems. I still remember using a credit card to buy food shortly after I got married, I’m glad that we’ve been able to overcome that situation.

  3. Georgfelis says:

    I blame Dave Ramsey and his “Get out of Debt and stay that way” programs, which have soured many people on the glorious life of being tens of thousands of dollars in debt. I mean what kind of horrid world would we live in if people were to actually live on the money they earn and save for emergencies and retirement! That’s just un-American!


  4. Right of the People says:

    We closed all of our accounts except for AMEX, 1 Master Card & 1 Visa because not everyone takes all of them and when you travel its nice to have. Two of those accounts have no balance and one has our monthly charge for XM radio and Onstar and we pay it off immediately. It took some sacrifices and a few years to get there but we decided long ago to live on a cash basis only.

    Wardmama, I agree with you 100% especially with #3. The kids today expect to have all the latest high tech crap and when they buy their first house they expect it to be just like Mom & Dad’s instead of a starter home.

    There is a lot the Dems could do to help get us out of the recession if they really wanted to but then they wouldn’t have their coveted “crisis” to exploit. They think if they can get the average schmuck to concentrate on the disaster in this hand, you won’t see the crap going on in the other hand. Look, there’s a squirrel!

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