Current economy trends and credit in general

[maxedout]

It appears that credit card delinquencies are next in terms of the big thing that may even further kill our economy. It appears for the 2nd month in a row, americans were late on payments in record fashion.

That being said and implied that conditions are going to get worse before they even see a glimpse of sunshine, it got me wondering how the overall implementation of the credit score is going to be viewed in the future. What I mean by that is since we know that everyone seems to be fit into some kind of scoring index/card/bucket, it would be reasonable to think that there are going to be MANY people dropping form the positive indexes and into the negative ones. Additionally, since our economy's bread and butter is based on consumerism, while they have pleged to cut back on credit lines (how many people got the dreaded reduction in credit by Crapital One or Citi or have had tradelines dissapear due to inactivity??) it may be another gloom and doom scenario for our economy. 

That being said, nobody knows how it is going to work out but IMO the average FICO score is probably about to take a beating if the economy doesn't show any kind of glimmer of hope as well as a sound mortgage fix that is ammicable to everyone. I just wonder how this is going to affect the average person in relation to everyone else once the dust settles probably in a few years.

Thoughts or opinions. Mods feel free to move if not in the right area.

[laz98]

i don't know, but, as selfish as this sounds, that would mean my score would put me in a higher bucket!  i'm not missing any payments, no matter what!

[maxedout]

I am just wondering what the overall impact is going to be. Considering anything below 740 right now probably won't get you prime, it would be resonable to conclude that in the future, they (banks) may have to REDUCE their standards to get people back into their consumerism mode. With as many foreclosures and missed payments out there right now, there is no way the "average" FICO score can stay where it is or even close. Sure you are going to have the people that weather the storm but there are so many people getting tossed around it isn't even funny. This or the banks are just going to have to treat delinquencies much differently than they do now or even worse, give everyone a "clean" slate, of which, I don't think is a reasonable thing to do.

[laz98]

i agree, the scoring system will have to change somewhat in order to compensate for the inordinate number of suddenly low scores we have. or at least lowER scores.

[maxedout]

I do feel that the retraction of credit is a GOOD thing at this point. I do NOT believe it should be hurting the FICO score for anyone that their bank reduced their limit and that is ultimately what is happening. Just as the financial sector is being overhauled, we indeed need another overhauling of the CRA's and scoring in general to take into account more unbiased scoring. Just chewing a group of people up and spitting them out statistically, IMO, DOES NOT equate to a true risk assessment. Situations change and many people, as stated in threads previously, have learned to control their finances due to being denied for credit or whatever since they were delinquent. I know in my own experience, I am a completely different person since BK. Mine was medically driven but you can bet your bottom dollar that I approach my finances in a different light.

[laz98]

i don't think people's credit lines should be cut without cause.  if there is a slow trend of a rise in balance, then yes, the line should probably be cut to minimize loss.  but if the consumer has not changed their purchasing or payment behavior, then i don't think they should be punished for other people's financial habits and/or situations.  many consumers are having their credit affected negatively when they have done nothing wrong.

i have mixed feelings about bankruptcy.  i see a lot of people using it as a way to get out of paying their bills, & are all-too-eager to get back into the saddle & start running the meter again.  & then i see others, such as yourself, that were simply unable to keep up with their bills because of unexpected medical expenses, & are looking for a way to start over.  i am very happy for you, that you were able to learn from your situation, but unfortunately there are many others who do not, & those are the ones ruining everything for everyone else.

[maxedout]

I agree and while I too hung my head in shame, had the hospital and more importantly, my student insurance cooperated with my pleading for a repayment plan (my student HMO APPROVED my visit at an out of network hospital, only to retract that once the bill was due to the tune of 20k), I wouldn't of had to file.

On the flip side of that, I do not believe a person with a 50k income should have credit card limits in excess of 10k. When I see people who make low middle class incomes have 50k worth of available credit to them, it kind of makes me nervous. That IMO, is what led to where we are now. You get a huge reality check when you pay for pretty much everything in cash. I have done that for the past 8 months. Although I don't have copious amounts of liquid money left over each month, I can take solice in the fact that my credit cards are not racked up. We have to re-learn to adjust ourselves to our incomes and stop the entitlement driven attitudes in this country. If  we cannot do that, FICO scores will mean nothing as our way of living is going to be brought back to the conastoga wagon era.