Tuesday, September 29, 2009
Credit Scores at Risk
Posted by Jorden Meltz
"This is blindsiding people," said Evan Hendricks, author of Credit Scores & Credit Reports (Atlas Books). "For a significant portion of people having their credit scores go down, it had nothing to do with what they did. This is the system making credit scores go down. This is a new thing in history."
There's no way to know how many good credit scores are being lowered by the credit limit cuts. FICO said its study showed that borrowers whose available credit was cut did not see a change to their median FICO score, which remained at 770. But the survey ended in October 2008, just as the financial crisis was beginning. It's unclear what has happened since then.
Even a small FICO score drop in today's environment of tight credit can make the difference in getting a mortgage, a car loan, or another credit card, and it can have an impact on the interest rate a borrower pays. The FICO score ranges from 300 to 850 and the best mortgage rates are generally given to borrowers who have at least about 730.
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