Shocking Effect of Recession on FICO Scores - as part of the news series by GeoBeats.
Considering we have been through one of the worst economic crisis in the country's history, one would imagine that the average credit scores of Americans would take a substantial hit.
SmartMoney has pointed out some very surprising data about those credit scores - the average FICO score in the country was 690 in April, 2012 roughly same as that in 2007 before the economic slowdown started. Millions of homes went into foreclosures over the last 5 years which would have negatively affected credit ratings.
Since lenders use FICO score to decide whether a loan should be given or not, does the data suggest a FICO score is not a good determinant of someone's capacity to repay and can lenders' reliance on it cause another crisis down the road?
FICO notes in its response - There are roughly 200 million U.S. consumers with a FICO score, so in order for the average score to change more noticeably, a much larger number of consumers on one end need to be affected.
What do you think about the usefulness of a FICO score? Does your score accurately reflect your ability to pay off debt?