Americans credit scores have plunged over the past four years despite a reduced use of credit cards and a widespread commitment to paying down debt.
Americans have reduced their consumption since 2006 and instead focused on reducing debt.
A superb credit score is necessary to get a home loan these days along with proof of income.
I am not surprised to see changes in the way FICO scores are made. We’ve never experienced anything like this real estate recession in 70 years.
With foreclosures soaring — and homeowners with unblemished payment histories abruptly walking away from their houses with no warning to lenders — the two major producers of credit scores have begun changing how they evaluate consumers’ risks of default. The revisions could affect you the next time you apply for a loan.
In late October, both Fair Isaac Corp., developer of the FICO score, which dominates the mortgage field, and VantageScore Solutions, a joint venture by the three national credit bureaus and marketer of the competing VantageScore, outlined modifications they were making to handle the vast credit disruptions caused by the housing bust, the recession, high unemployment and behavioral changes by consumers.
Overall, credit industry experts agree, consumer creditworthiness has deteriorated in the U.S. since 2006 — especially among what used to be considered the credit elite, people with the highest scores. For example, a study this year by VantageScore found that the probability of serious delinquency — defined as nonpayment for 90 days or more — had increased 417% among “super-prime” borrowers between June 2007 and June 2009. Default risk during the same period rose 406% for the second-highest-rated category of “prime” consumers, and nearly doubled for those at the “near prime” scoring level.