06.25.09
By John Ulzheimer
Normally a consumer sporting
FICO scores in the high 600s or low 700s, which is about average, would be considered a decent credit risk and probably wouldn’t have a hard time getting approved for auto loans, mortgages, or credit cards. At least that was the case before 2008. Now consumers who have successfully maintained their average FICO scores are finding that the market has passed them by and left them shut out of many loan options.
The problem many consumers face isn’t their own deteriorating
credit scores but rather the ever-increasing minimum score requirements of many lenders. This means someone with a mathematically average score two years ago is still just that. But mathematically average back then is now considered below average.
For example, consumers who used to easily obtain credit with their 680 FICO score are now finding it harder or impossible even with the
same 680 score. The point is that simply
maintaining a decent score isn’t keeping you from falling behind the pack. You really need to be well in the 700s to be competitive in this tight credit market.
The long-time goal for score junkies has always been to improve their scores as high as they can. And since the highest FICO score you can achieve (850) is kind of like the Loch Ness Monster (you hear a lot about it but nobody has actually ever seen it), the “promised land” of credit scores is really somewhere in the low 800s. This keeps you in the lowest risk categories and on the safe side of approve/decline decisions.
So if you’re planning to apply for a new loan, regardless of the loan product, it’s in your best interest to not simply rely on what was at one time a solid score that served you well. Working to
improve your scores is as financially beneficial as buying from the clearance rack or waiting for tax-free weekends.
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