The U.S. has made credit a really important part of the economy. Credit scores are within the exact same boat as the economic recovery appears to be. People have not been paying much of their debt most recently. Some who lost their jobs had no choice. Many would rather have stopped paying than lose money into a home. Either way, these people face the challenge of living with a bad credit score. After the immediate relief of defaulting on debt, a long-term financial obstacle course lies ahead for them. Considering help won’t come from any of these people with poor credit, the recovery will take a lot longer.
More individuals have low credit scores
It seems like there is no way to get mortgages, car loans, or credit cards for anybody in America. The Christian Science Monitor explains to its readers that there was, historically, 15 percent of people with a Fico score of 600 or less before now. A recent FICO report shows that the number has reached 25.5 percent now. There is a pretty good chance based on an additional dip in housing prices and continuing foreclosures along with unemployment that there could be more individuals going below 600 before there is any improvement.
Can’t do anything with low credit
Since a quarter of America has a terrible credit score, only a quarter of all individuals could be able to take out loans. The Federal Housing Administration programs will let credit scores be as low as 580 and still give out loans. Fannie Mae and Freddie Mac have the majority of the market under them and won’t lend for anything under 650 now. Nobody can be getting auto loans for people with bad credit or credit cards either.
Checking credit when hiring
Everyone who lost their job will have a hard time finding a new one with a poor credit score. CNN shows us that there are a lot more hiring managers checking credit before hiring a new employee. Missed payments on a mortgage, car loan or credit card could keep them from getting hired. The Society for Human Resource Management did a survey showing that when companies are filling a position, 60 percent do credit checks. The number jumped there from 1996 when it was 13 percent to 2003 when it was 35 percent to where it is now.
Rebuilding a credit score can take years
Millions of cash-strapped Americans have gotten urgent financial relief from defaulting on debt. There can be severe consequences for this of course. Generally 3 to seven years are taken to build a credit score back up. Many Americans can have a hard time getting out of debt with all this poor credit.
Discover more on this subject
Christian Science Monitors
csmonitor.com/Money/new-economy/2010/0727/Credit-scores-slide-downward
Wall Street Journal
blogs.wsj.com/economics/2010/07/31/number-of-the-week-default-repercussions/
CNN Money
money.cnn.com/2010/07/22/news/economy/credit_checks_for_job_applicants/
