Most Americans Have Subprime Credit Scores, Study Says

Credit ScoreAlthough, the job market in the United States is gradually improving and actually doing so at the fastest rate since the turn of the century, there is no shortage of consumers who continue to struggle with poor FICO scores, or credit scores.

A study by nonprofit group Corporation for Enterprise Development (CFED) revealed, that 56 percent of consumers surveyed have subprime credit scores. The survey described how these individuals are unable to borrow, may it be for a mortgage or qualify for a credit card, due to black marks on their credit reports and subsequently lower FICO scores. And should these consumers be able to borrow, there is a good chance they are having to pay interest at high rates, as opposed to those with good to pristine credit, who get good rates instead.

According to study author and CFED director of state and local policy Jennifer Brooks, a lot of these troubled consumers have no choice but to use dubious solutions in order to borrow like they would want to. “There are millions of Americans who are being excluded from the financial mainstream,” she observed. “They’re relegated to using fringe, often high cost financial products that trap them in a cycle of debt.”

In her statement, Brooks did not specify what type of products she was referring to, but these products include, but are definitely not limited to payday loans, which have been notorious for their deceptively onerous terms, even if they can provide instant relief.

The CFED’s report had culled credit data from credit reporting agency, TransUnion. Data on credit scores was taken from the agency’s TransRisk Score, which ranges from a low of 100 to a high of 934. All credit scores 700 or lower are considered by TransUnion to be either near prime or subprime.

Refinance at
Loan Type

Please enable JavaScript for the best experience.

In the light of the CFED’s new report, credit specialists believe that the data contained therein is proof that there are many Americans who are still in the process of repairing their damaged credit, even with the economy improving, same with employment. Repairing credit, after all, is a process that does not happen overnight. Infractions, such as late payments, delinquencies, accounts going to collections, or foreclosures, can stay on one’s credit report for up to seven years, while bankruptcy filings can stay for a good decade on a credit report.

Be that as it may, the Great Recession that affected the United States and the majority of global markets, is still affecting consumers as we know it. During those tough years in the late 2000s, otherwise-timely consumers had fallen behind on their debts, and ended up with their accounts in collections, their homes foreclosed, or been forced to file for bankruptcy.

According to CreditSesame.com president of consumer education John Ulzheimer, most people may have been able to “fight the fight” and remain gainfully employed. “If they did eventually lose their home, they probably didn’t do so for a few years,” he added, hinting that it may also be another few years before these black marks are expunged from consumers’ credit reports.

Are you interested in homebuying or refinancing? Compare current mortgage rates of top lenders.