The U.S. has made credit a really important part of the economy. Economic recovery and also the credit scores for a big chunk of the U.S. population are mired within the very same pit of quicksand. It appears like people have given up on their debt as it is no longer being paid by most. Numerous of these are because of a job loss. Others, like strategic mortgage defaulters, walked away instead of losing more money although they could pay. Living with a bad credit score is the result of this nevertheless. All of these individuals have poor credit as they are trying to move on. And U.S. economic recovery could have to limp along without their help.
Chances are you’ve a low credit score
In the past few years the recession has rendered millions of Americans no longer able to qualify for a mortgage, a car loan or a credit card. The Christian Science Monitor explains to its readers that there was, historically, 15 percent of individuals with a Fico score of 600 or less before now. A recent FICO report shows the number has reached 25.5 percent now. There is a quite good chance based on another dip in housing prices and continuing foreclosures along with unemployment that there will be more people going below 600 before there is any improvement.
Can’t do anything with low credit
With 25 percent of Americans with credit scores below 600, one in four won’t be able to borrow money for a major purchase for quite a when. The Federal Housing Administration programs will let credit scores be as low as 580 and still give out loans. 650 is what Fannie Mae and Freddie Mac are looking for when lending. Getting auto financing or credit cards will also be tough.
Job credit checks increasing
Any person who lost their job can have a hard time finding a new one with a bad credit score. CNN reports that an increasing number of employers are using credit checks to screen potential job applicants. 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. Only 35 percent reported checking credit in a 2003 survey, and only about 13 percent did so 1996.
Credit repair takes ages
Defaulting on debt has been common in this recession because of the relief it gives. But individuals thinking about following suit should know that the short term gain will have long-term consequences. Usually 3 to seven years are taken to build a credit score back up. Bad credit brought on by the recession will make it more difficult for numerous Americans to work their way out of it.
Additional reading
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/
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