Americans’ credit scores hitting new lows

A recent survey has found that the poor economy is causing the credit ratings of individual Americans to sink to all time lows.

As of late April, more than 25% of Americans have a FICO score below 599.

Paradoxically, the number of people with perfect scores of 800-850(sounds like the SAT, doesn’t it? ) has also been creeping up; almost 18% are in this stratosphere, up form a historical average of about 13%.

And even folks with scores in the middle are getting squeezed. Florida mortgage broker Ritch Workman relates the following tale to Eileen Connolly of the Associated Press: “A customer with a score of 679 recently walked away from buying a house because he could not get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been a half-percent lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000.”

“There was nothing derogatory on his credit report,” Workman said of the customer. He had, however, recently gotten an auto loan, which likely lowered his score.

How does all this scoring affect those in need of bankruptcy? The best advice I can give is that being four months behind on a loan, being in foreclosure, or filing a bankruptcy case all have about the same affect of your score.

Filing the bankruptcy, however, has the advantage of wiping away most of the underlying problem, which allows your FICO scores to start climbing again, typically in about a year for a debtor who becomes scrupulous about paying bills going forward.

 

By Doug Beaton

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