FICO Inc. recently released its latest analysis of credit reports to reveal that, as of April 2010, 25.5 percent or nearly 43.4 million Americans have credit scores that rest at 599 or lower. Representing one-fourth of the population, these numbers show that more Americans have scores that could prevent them from getting credit cards, auto loans, affordable mortgage interest rates and more.
Why Are Scores So Low?
The lowest percentage weve seen of consumers with credit scores of 599 or lower was 15 percent (or 25.5 million people) prior to FICOs recently published numbers. The reason that so many scores are lower than the good score mark of 700 is because the economy is still recovering slowly.
With millions of people still out of work (the unemployment rate as of May 2010 was 9.3 percent) and many others struggling to pay their bills, credit scores have undoubtedly suffered.
Dont Fall Into this Trap
When we hit hard financial times, its not always easy to avoid lowering our scores, especially since food and immediate needs tend to take precedence over other bills. And even those who want to make payments often have a difficult time understanding the formula for a good credit score, which could result in inadvertently lowering the score.
But there are ways to avoid falling into the trap of the lower credit score, even if times get tough. Here are a few ideas to consider:
- Making minimum payments is acceptable: If you have a credit card that youve always tried to pay off month after month, try dropping down to the minimum payment until your financial situation is better.
- Making payments on time is important: If at all possible, do not miss any payments that get reported to the credit bureaus and make your payments on time.
- Asking for payment arrangements is a good thing: If you find that you simply cannot make your payment on time, immediately contact your lender, credit card issuer, etc. and discuss your financial situation. Youd be surprised by how understand they could be and how willing they are to work with you to avoid reporting a negative status to the three credit bureaus.
- Taking on new credit could hurt you: If youre already in danger of falling below the 599 line, its good to avoid taking on new credit until you stabilize and begin to pay off some debts.
The good news is that the number of consumers who have scores of 800 and above also increased, according to the FICO report, which means that increasing your score is not a lost cause. By taking time to apply the steps necessary to manage and then improve your credit, you decrease your chances of adding to the percentage of consumers with poor credit scores.
Similar Posts:
- Credit Card Defaults and Late Payments Drop with Top 6 Card Companies
- What is a Revolving Credit Account?
- Who Looks At Credit Scores?
- State Seeks Ban on Insurers’ Use of Credit Scores
- The Five Factors that Make Up Your Credit Score
