OUR CREDIT SCORES STINK
Recent data from FICO Inc shows that the average American’s balance sheet is continuing to deteriorate. As the debt binge of the last decade has imploded the average credit score has plummeted:
“Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.
Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.”
But hey, at least we always have a means to purchase Apple’s next product that you almost certainly won’t need. And let’s not forget, this is all part of the great banking profit machine so don’t think of it as a weakening consumer – think of it as a stronger banking system. Our money becomes their money, the US economy recovers, etc, etc. After all, isn’t that basically what regulation, monetary policy, and fiscal policy have been geared towards anyhow? Everyone’s a winner! Or so the Bernanke trickle down theory goes….
Funny how things turn out. Many people were bashing the subprime market when the economy crashed. Now, many of those people ARE subprime.
FHA last sucker giving mortgages to this group because no securitization suckers left to fleece in private mlt. Thankfully the govt has qualms using the taxpayer as ultimate sucker and source of funds to keep the charade going.
I wonder how many of these people turned to debt once their work was sent to China or India.
I always thought of credit as a luxury. I had no idea that businesses often need loans just to operate much less expand. That is just insane. The counterfeiting cartel has an absurd choke hold on the economy.
“I had no idea that businesses often need loans just to operate much less expand. That is just insane.”
I agree. I remember back in ’08 when I discovered how much of small business required credit just to make payroll, etc. They were/are living right on the edge. No wonder the credit crunch caused such an implosion.
It’s the just-in-time business model applied to the cash flow as well as inventory. It squeezes out a tiny bit more profit, sometimes, I suppose, though I’m skeptical of that for the most part. But it makes you terribly vulnerable to any hiccup in that flow. It’s crazy.
Ease of credit is relative. I can remember a time when you had to get a car loan only from a bank .. let alone 0% for 4 years to anyone with a pulse. Auto sales were brutal in the 80′s recession (I think dropping >50%). People forget what a “normal” recession is like; yet everything earlier than 1990 is lumped into 1930. The world is not going to end. But, I’m a bit optimistic on the free ipods. I have this nagging feeling that no matter what the auto industry or CE manufacturers say, net profit margins are going stick in very low single digit and if that means swallowing loss on subprime customers I think they will do it. Watch in 2015 when the GM CEO says “we’ll continue to maintain our discipline in focusing on profit and not revenues, but this expansion and debt raise will be a game changer as we take back market share from our competitors …” blah blah blah.
This story pretty much contradicts this commonly held belief that consumers are eagerly reducing their debt. If that was as commonplace as is believed, then their credit scores would be going up, not down.
This story does support the point that a lot of the deleveraging is occurring through default, bankruptcy, charge offs and workouts. That trend should continue and it’s actually good for the long run health of the economy. Not all of this debt is going to be paid, nor does it need to be.