The economy used credit in almost everything being done. The whole economy seems to be sinking along with all of the credit scores. Millions of Americans have reneged on their debts within the past couple of years. Some who lost their jobs had no choice. Many individuals quit paying their debt since the loss of money was not worth it to them anymore. Either way, these individuals face the challenge of living with bad credit. After the urgent relief of defaulting on debt, a long-term financial obstacle course lies ahead for them. Considering help won’t come from any of these individuals with poor credit, the recovery will take a lot longer. Source for this article – Low credit scores may exclude millions from economic recovery by Personal Money Store.
Low credit scores probably
Hardly anyone can get a mortgage, car loan, or credit card now and days. Generally, there is only 15 percent of individuals that fall under 600 with their FICO scores, reports the Christian Science Monitor. A recent FICO report shows that the number has reached 25.5 percent now. The continuing high rate of foreclosures and unemployment and a looming second dip in housing prices suggest the credit picture could worsen before it improves.
Poor credit score means never getting to borrow
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 while. 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. Nobody could be getting auto car loans or credit cards either.
Checking credit when hiring
Having a bad credit score might just affect your chances of getting a job. A growing number of companies are doing credit checks when hiring their employees, reports CNN. Missing any of your payments might just mean you won’t get a new job. The Society for Human Resource Management did a survey showing that when companies are filling a position, 60 percent do credit checks. In 2003, that number was at 35 percent when in 1996 it was only 13 percent.
Years spent fixing credit
Millions of cash-strapped Americans have gotten instant financial relief from defaulting on debt. But people thinking about following suit should know that the short term gain can have long-term consequences. A damaged credit score can take between 3 to 7 years to bring back to where it was. 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/