An economic slowdown or recession quite often affects consumer credit scores. Part of this is fueled by an increase in the number of foreclosures and plummeting home and property values. Creditors become much more hesitant to approve loans and mortgages, even to those who have an excellent credit history and job security. They begin to apply stricter standards to borrowers and it becomes more and more difficult to get a loan.
Credit card companies have reacted to the failing economy by pulling back on their credit limits. They are fully aware that the average consumer not only increases their need for credit during difficult times, but they also hold on to their debts longer and that almost always causes a drop in scores.
Banks are also closing a considerable percentage of consumer's credit card accounts while at the same time, reducing millions of dollars in their lines of credit. That affects the consumer's credit utilization which accounts for 30% of your credit scores.
TransUnion, one of the big three credit bureaus, recently reported that the average credit score has dropped 6 points to 651. The other major credit bureaus, Experian and Equifax are seeing similar numbers. Typically, a score of 700 or less puts your credit into question with lenders. So if your score was marginal before the economic downturn, it now may disqualify you from getting a loan altogether.
It's important to remember that your credit score reflects how you spend your money as well as how you pay it back. In the current economic climate, more and more people are using credit in place of cash.
Paying utility bills is a good example: Instead of having their monthly power and heating bills taken directly from their bank account, they are using credit cards instead. And of course, this means that they are responsible for the interest on the amount used to pay their bills. As you can imagine, this is unfortunately affecting consumer credit scores in a negative manner.
The extensive use of one or more credits cards, even for the bare necessities, pushes the balances owed on those cards closer and closer to the card's limit. And as a card approaches its limit, the owner's credit scores suffer.
This free video presentation reveals what bills you can pay late WITHOUT affecting your credit scores if you are in a financial jam. You can watch the video here:
Finally, perhaps the biggest crisis is that falling credit scores are keeping consumers from getting credit when they need it the most. As long as businesses continue to downsize or close altogether and families take on more household debt, consumer credit scores will continue to fall.
Now more than ever, consumer credit scores are the key to financial freedom and the lifestyle we all want and deserve.
You can boost your credit scores yourself WITHOUT paying THOUSANDS of $$$ to an attorney or credit repair company.
This free video presentation explains how you can save yourself thousands of dollars and the secret techniques involved:
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