Last week, I believe, the news hit the wires that credit card delinquency hit the highest level ever – 6.5%. That was a good sign the high unemployment was starting to hit the consumer in the pocketbook. It was just a matter of time that consumer credit scores started to fall…
From the third quarter of 2008 to the first quarter of 2009 — the latest data available — the average TransUnion credit score dropped 6 points to 651, the credit bureau says. Scores fell more dramatically in states hardest hit by the housing bust: California saw a 10-point drop, for example, and Arizona, 11.
“Consumers are feeling the bite of the current recession,” says Ezra Becker, a director in TransUnion’s financial services group. “With delinquencies showing up in credit files, it’s not surprising that the average score is decreasing somewhat.”
More and more it seems that people are deciding – do I pay for food or do I pay the mortgage this month (or some other bill). This leads to individuals push off payments and a hit on the credit score. I know of two such people. All they are guilty of is being laid off, now their credit is crap – and they’ve eaten through some of their retirement funds as well.
Before we jump on the “well, you shouldn’t have lived outside your means” bandwagon, there is a good chance that a number of these people didn’t do anything wrong. They didn’t live outside their means but just found themselves in the proverbial “wrong place at the wrong time.”
All of this makes me ask does the credit rating system need to be revamped? Is there a better way of ranking/rating the buying power of a person than simply sticking a number on a file that belongs to their name?
I don’t have an answer to the question, it was just random thought…
Related posts:
- Credit cards companies may cut up to $2 trillion of credit
- Citi suffers $8 billion in consumer credit losses, starts closing credit accounts without warning
- Ford: Giving credit where credit is due
- The “refinancing rush” due to plunging interest rates?
- Good credit? Pay your bills off? Don't worry, there is a fee for that.