Posted on 07/12/2010 12:10:05 PM PDT by Qbert
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.
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.
"I don't get paid for loan applications, I get paid for closings," said Ritch Workman, a Melbourne, Fla., mortgage broker. "I have plenty of business, but I'm struggling to stay open."
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.
(Excerpt) Read more at news.yahoo.com ...
Wait, what’s this about mortgage interest not being deductible next year, let’s clarify that PDQ if you please.
If you don’t think this is coming, you’d better stop dreaming. I heard this on the radio this morning about the things Obama was saying about the hard choices coming and some of the ‘taboo’ hands-off deductions. It is coming as sure as Evil runs this country right now.
No kidding. I don't own a credit card and haven't for nearly 15 years.
Initially it wasn't my choice, a divorce gave our home to my ex-wife but a divorce decree doesn't protect you from the bank's claim that the person who doesn't own the home is still responsible for it. So every time my ex is late on her mortgage it goes as a late pay on my credit. The bank says my only recourse is to pay her mortgage for her so that it doesn't reflect on my credit...yeah, right.
But since then I'm down to just 1 debt, an old student loan. And words fail to convey how freeing it is to not be under mountains of debt and I highly recommend it for everyone.
I do have a question, though . . . If you were disciplined enough to pay down all of that debt, what would be the danger of you keeping, say, $15,000 in open lines of credit available? This would keep your debt-to-credit ratio low, and would help protect you in the event you needed money in an emergency.
Now we have closed all of our accounts and paid off all but $2000 in debt. (Thank you Dave Ramsey!) Now our credit to debt ratio is about 90% maxed.
Way to go! As for getting credit with a low (or even a ZERO credit score), I think Dave has mortgage ELP's that lend to ultra-low debt to income folks like yourself. Have you checked his website?
Well duh!!
Millions had great credit or outstanding credit for the past 20, 30 or 40 years...Now they've lost jobs, homes, investments, businesses and can't pay the bills....Suddenly they find out they're now treated like scum, as if they've always been a risk
What a joke...
The truth of the matter is that the mortgage interest deduction isn't a very good government policy to begin with.
When an account is closed, all the big 3 credit bureaus see is that an account was closed.
Having said that, you absolutely did the right thing and should be proud of that.
I was laid off in 2004 - worked temp jobs (1/2 salary) for almost 2 years before landing a great job. Paid my bills/mortgage but was often late since I had to wait two paydays to get enough to pay the mortgage since my salary was so low. Knocked the crap out of my credit score. From 2006 till now, paid all my credit accounts off and haven’t been late on a mortage payment for well over 2 years. Applied for a general purpose loan to get a new furnace - was denied - guess why? INSUFFICIENT CREDIT!!!!!!!!!!!!!!
Amazing, isn't it? The whole damn thing is a racket.
It was the whole concept of using credit as our “emergency” fund that got us into trouble to begin with.
At first we closed all the open lines of credit that we hadn’t used in yearsl. Accounts we’d closed a decade a go were still on our credit report as open.
Then, as we paid off debt, we closed or reduced our available credit to avoid temptation.
On August first we’ll pay off the last of our non-mortgage debt. After that we’ll start working on a $15,000 emergency fund. After that, we pay off our land. Then we start saving to pay cash to build our dream house.
So close! :)
That's my goal. I'm getting there. Slowly.
Few people realize just exactly how far down the crapper this country is, financially. To even keep some semblance of comportment between his lies and financial reality, he is going to have to make a respectable attempt at making things even out. It will be impossible to do this without hitting deductions like these (mortgage interest), new taxes on 401Ks and IRAs etc. You can’t keep a house of cards together long enough without them.
Yup! We’re in the process of getting kits for my daughter and her fiance.
We’ve got about two years before our credit will be an issue again. At that time we’ll have to get help with the refinance.
(We’re trying to set it up so we don’t have to refi. I want to just pay off the friggin’ house. But sometimes we don’t get what we want.)
Actually, they should just give up, move in with family, and sell apples for spare change. With a bad credit rating, you might as well be a bum - which is what most Americans think you are, anyway. “Live within your means” is a fair-sounding slogan, but what if you have no job and can’t find one? You have no means - so do you really have a right to live?
You might as well die, preferably somewhere where no one would find your corpse. That way, we won’t have to spend tax money on burying your sorry debtor’s butt.
The entire system is set up to gang rape and economically screw the little guys...
Ya can't pay your bills and what do they do? Raise your interest rate and penalize you with loan shark style penalties. lol...
See # 26
It's why a lot of people said, "Screw them too".
“..believe that FICO scores are designed to screw us..”
DING DING DING!!!
Sorry your situation got so bad, but I hope you know I wasn’t talking about you per se. You didn’t go out and get an interest-only loan for a million dollar house did you?.. Do you have a credit union where you work or qualify for a credit union membership because of your type of work?
I do not see how this is a problem. The last thing people with poor credit should have is easier access to more debt.
The way I read the article, it sounds as if the "logical" way to "fix" the economy is to once again lower credit standards so that anyone can borrow.
The entire system is set up to gang rape and economically screw the little guys...
Ya can’t pay your bills and what do they do? Raise your interest rate and penalize you with loan shark style penalties. lol...
See # 26
BTW.............
If the entire banking system/loan/credit industry were physical, like boxing, it would be perfectly fine to beat your opponent to death with a baseball bat once you’ve knocked him out.
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