Sinking Credit Scores
— July 28, 2010 —
In an article on azcentral.com from E.A. Connelly, AP personal finance writer, dated July 12, 2010, Ms. Connelly states that the credit ratings of millions of Americans are sinking.
She stated that FICO shows 25.5% of consumers (43.4 million people) have a credit score of 599 or lower, which makes them a poor credit risk for lenders. In the past, only 25.5 million fell below 599 according to Myfico.com. Down roughly 5.3 million people, those in the moderate range (between 650 and 699) are finding financing options, but are also finding it difficult to obtain the more affordable loans once available. Above the historical records, the number of consumers with an 800 score or better has increased due to consumers cutting spending and paying off debt due to the recession.
Because of the restricted access to credit, as we in the automotive industry well know, the economy is slow to recover. Ms. Connelly notes that since unemployment is at it’s highest levels since most of us can remember and with record foreclosures, this can cut 150 points off an individual score.
Because it takes years to improve an individual credit score, consumers and dealers have to change the way they look at securing financing for vehicle loans. Higher interest rates and more cash down are now the norm when negotiating the sale.
The pendulum has swung from one extreme to the next when it comes to lending practice. Being aggressive and creative are the new standard operating procedures as automotive dealers look for innovative ways to sell more vehicles and better serve consumers.
To read the complete article by E.A. Connelly, visit azcentral.com.
Filed under News.