Americans FICO Scores are at an All Time Low. So What?

It seems that in today's difficult economic weather, just about everyone is a risk for a lender.

Earlier this month, FICO, Inc. (the company that develops credit risk metrics) reported that America’s collective credit score is at an all-time low. Close to 43.4 million consumers have a credit score at or below 599, which is the risk benchmark for the majority of lenders. This means that more than 25 percent of us are likely to not get a car loan, new credit card (really?) or a mortgage.

FICO arrived at their conclusion through an analysis of April’s consumer credit reports. Historically, only 15 percent of all “credit-active” consumers fell below the 599 mark. That statistic alone should demonstrate the impact of what is currently happening with our economy. In other words, it’s been a long time since our country has been in this type of situation.

One of the reasons for today’s poor credit scores is the widespread availability of credit in the last few years. Quite literally, credit spread like a virus. Neighbors saw neighbors move into bigger houses, buy faster cars and take extended trips and wanted the same. Financial conservation became a virtue of past generations, like butterfly collars and 57 Chevys. In 2007, that’s just how you lived. Equity lines. Sub-prime mortgages. Rewards programs.

In response, personal bankruptcies are continuing to climb, and probably will for quite some time. As we have said in previous posts, often those most in need of bankruptcy code protections don’t file, perpetuating their issues. Our hope is that many of our clients will be in an ideal position to reclaim their financial livelihood when our country gets to a point where economic recovery can be legitimately proven and not just faintly derived from confusing figures talked about on business stations.

In light of this news, we are reminded that we tend to put a lot of pressure on a number. This becomes a recurring topic on the blog because we have been taught that a solid credit report is a sign of success, a mark of “making it.” We’re told we can’t have things and can’t go places. None of which is really true. As we have said numerous times in this space, wealth is relative. Pursue only what you need, and try to need very little. And if your obligations are forcing you to choose between paying back an aggressive creditor and putting food on your family's table, it's time to think about bankruptcy. Call the experienced bankruptcy attorneys at the Law Offices of John T. Orcutt for your free consultation. +1-833-627-0115. Call today. Offices in Raleigh, Durham, Wilson, Fayetteville and Lumberton North Carolina.