Posts Tagged ‘great recession’

American Credit Scores: Another Casualty of the Great Recession

A full quarter of American consumers, 25.5%, now have credit scores of 599 or below, according to a recent sampling by FICO Inc.  People with scores this low are unlikely to qualify for any sort of consumer lending. They will be unable to get a credit card, buy a car, or a home.

As unemployment and foreclosures continue to plague the economy, more and more people will lose ground on this important metric for consumer lending. FICO expects the percentage of people with low credit scores will continue to rise in the near term, since credit reporting often lags behind late payments and the economy has gotten no better.

On the flip side, the percentage of consumers with scores of 800 and above has also increased over historic levels to 17.9%.  This means that anyone who has managed to hold on to his job and is still doing relatively well is being very cautious and paying down what he owes.

The effects of plummeting credit scores will be felt for years since banks have tightened lending standards recently. Even people with scores in the medium range of 650 to 699 will find it harder to obtain financing at a decent interest rate. Those with scores below that will be unable to find financing at any rate, and it will take years for them to recover what they’ve lost.

Related articles:

How To Rebuild Your Credit Rating

See Your FICO Score

The “New Normal” According To One Fed Official

Sandra Pianalto, the President and CEO of the Federal Reserve Bank of Cleveland has predicted that our recovery from the Great Recession will be slow and that the end result will be a “new normal” where Americans’ expectations for a better life are diminished.  Read the entire article on the Huffington Post here.  A full transcript of Pianalto’s remarks are included in that article.

I don’t know why this is news, exactly.  Anyone out in the real world knows that this “recovery” is slow and most Americans aren’t planning anything farther into the future than how they’re going to pay the power bill when it comes due. 

Many people are now just aiming for ‘financial security’ as their American dream.

This downward shift in expectations isn’t something that has happened overnight. True, during the bubble years, when everyone was able to use cash out of their rapidly burgeoning home equity to buttress them against the effects of low wages and a high cost of living, Americans were able to have a semblance of a stable middle class life.

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