Average credit score in 2009 and 2010 in America to decrease
Several recent reports and experts suggest that US average credit score in 2009 is on the way up and will go higher in 2010. I have to still find a slightest evidence of such an assumption, unless the FICO credit scoring system in America will be changed rather dramatically. There are too many factors that are and will be negatively influencing average credit score across the US, including the scores of unemployed consumers struggling to pay their credit cards, continued waves of foreclosures and car repossessions, bankruptcies, falling home equities, tougher credit card regulations, mortgage modifications and growing number of defaults on student loans.
Average credit score and foreclosures
The number of people facing foreclosure is not getting any smaller. On the contrary, there are predictions of another huge wave coming, that is of home owners with perfect credit who because of one reason or the other, mainly fallen home values and high unemployment, will get foreclosed or at the very least miss a payment or two. That will drag US average credit score down. Another factor is that in several states including California and New York the foreclosure process take some 9 to 12 months and often longer. So many ongoing foreclosures will be popping up on credit reports in the end of 2009 and throughout entire 2010. While going delinquent on your mortgage payments hurts your credit, getting foreclosure on your report simply kills your credit score.
Bankruptcies and average credit score
Growing number of consumers who had to file for Chapter 13 bankruptcy because they could not qualify for Chapter 7 under 2005 bankruptcy law revision because of income limitation, are now filing in large numbers since they have no income or it is drastically down. That includes many small business owners who were forced to close not only because of lack of demand but also banks not extending credit. Bankruptcy, of course has a huge negative impact on credit score, helping to bring average FICO numbers down.
Falling home equities
How low can they go? That is anyone guess but the scary part is that the home values are falling. There are several factors in play,
- fewer qualified home buyers all the market and government incentives notwithstanding
- fewer interested home buyers who want to stay liquid because of the tight job market or simply do not want to get into the mess of home ownership
- more potential buyers suddenly realizing that home values won't grow back as fast as they fell
- more real estate educated and Internet savvy buyers waiting for the prices to come down lower, not willing to buy yet and may be for while
So with many homeowners currently relying on their home equity lines of credit to meet monthly payments and expenses, these lines are now maxed out just like credit cards would be. The lower home values do not encourage banks to increase those lines. So people miss on their payments and hurt their credit scores, bringing US average credit score lower. Also, home equity line of credit is a revolving loan, so one should worry about how much balance is there with respect to credit limit.
Credit card regulations will hurt average credit score
Not only credit card issuers cut the credit limits of millions of consumers, damaging their credit scores in the process by increasing credit utilization rate, but as we pointed out in Get credit card now, today, getting a credit card from February 22 and on, for anyone under 21 will be much tougher. Those very first credit cards have been a great way for many to quickly start and establish credit history.
How was your mortgage modification reported?
While government complains that not enough distressed homeowners have taken advantage of different mortgage modification programs and plans including Obama mortgage plan, many of those who did learned that the way mortgage modification was reported to credit agencies decreased their average credit score by tens of points. Only in America.
Student loan default on the rise
Besides foreclosure and bankruptcy, few things cause heavier long term damage to your credit score than a delinquent student loan. With very bad job market, and it is much worse than officially reported, the unemployed or underemployed graduates can not make payments, and the number is getting larger by the day. Many with degrees in finance, computer science and liberal arts hit hard times finding work. Worse yet, the ones who consolidated their school loans at relatively high interest rates but managed just fine because of highly paid jobs, are struggling now.
Finally take a look at State by State average credit score chart from creditreport.com. Not sure how current it is but the lowest FICO scores are at Texas, Arizona, Nevada, New Mexico and Louisiana. The highest are in South and North Dakotas, Minnesota and Vermont.
Sat Sep 12, 2009 02:09PM | Copyright: www.bad-credit-advisor.com | More in Credit Repair Tips | Comments (0)
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