Credit Scores Fall Dramatically Across the Nation

With our national economy in the worst shape it’s been in since the Great Depression it will come as a surprise to no one that consumer credit scores have then hit hard nationwide. According to the credit bureau TransUnion, credit scores have fallen 6 points on average nationwide to 651 since the beginning of the third quarter of 2008.

While 6 points may not seem like a lot, it actually is. And some states have been hit especially hard. The average credit score in California fell by 10 points and the average score in Arizona saw an 11 point drop off. These disparities can be attributed to those particular states being hit hard by the collapse of the real estate market. Home foreclosures are murder on credit ratings.

Credit scores range from 350-850. A score of 750 or better is considered to be excellent and will qualify a consumer for the very best interest-rates available.

Believe it or not 2 out of 3 Americans have credit scores. That’s right, a full 200 million consumers across the United States have credit scores. You put that in the context of knowing that the national credit scores have fallen by 6 points and you can easily see just how bad things have gotten economically over the past couple of years.

At the heart of this precipitous decline in credit scores is an unemployment rate that is the highest we have seen in the past 25 years, and a record high number of credit card delinquencies and defaults. Credit card delinquencies are up 6.5% and defaults, also known as charge-offs, are 7.5% higher.

While real estate foreclosures wreak havoc on people’s credit ratings there are many times more people with credit cards than with mortgages. So you can see that the bulk of this drop is due to credit card debt.

When we factor in the aggressive actions of credit card issuers trying to mitigate risk by lowering credit limits and closing credit card accounts, both actions cause credit scores to fall, we can see how the national average of credit scores has fallen so far so fast.

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