Being one with low credit scores makes you one hurting the economic recovery

The U.S. has made credit a really essential part of the economy. Credit scores are within the exact same boat as the economic recovery seems to be. Millions of Americans have reneged on their debts in the past couple of years. Numerous of these are because of a job loss. Numerous 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. It is going to be fairly hard to move on through this economic crisis when nobody has good credit. And U.S. economic recovery will have to limp along without their help.

More people have low credit scores

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 people with a Fico score of 600 or less before now. In April, that figure stood at 25.5 percent, as outlined by a recent FICO report. 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.

Low credit scores left out of lending

Since a quarter of America has a terrible credit score, only a quarter of all individuals will be able to take out loans. 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 loan for bad credit or credit cards either.

Checking credit when hiring

For people who reneged on their debts because they lost their jobs, finding a new job could be tougher with a low credit score. CNN shows us that there have been a lot more hiring managers checking credit before hiring a new employee. 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.

It could be a while before credit could be fixed

Defaulting on debt has been common in this recession because of the relief it gives. But individuals thinking about following suit should know the short term gain may have long-term consequences. A damaged credit score can take between 3 to 7 years to bring back to where it was. The recession credit is going to be especially hard to get out of for many Americans.

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/