Preferred Financial Services

Andover, Massachusetts July 12th 2010 – As American consumers continue to struggle with mountains of debt and an uncertain job market their credit scores continue to be affected in a serious way. FICO Inc. has recently released a report detailing the breakup of the nearly 170 million Americans with a credit history and the numbers are quite sobering. Nearly 43.4 million Americans, almost 26% of consumers in America now have credit scores below 599, making them the riskiest group for lenders. People with scores this low are very likely to be rejected for credit cards, auto loans, mortgages, student loans, or any other kind of credit. And even if they are approved the terms they receive tend to be so expensive as to make the loan not worth it for the consumer.

This low score is impacting not only their personal finances but is also a reason the economic recovery is progressing so slowly. The US economy is dependent on consumer spending for a majority of its growth and as long as consumers don’t have access to affordable credit the economy will not recover to pre recession levels. In just the last two years, that group of lowest credit score holders has increased by 2.4 million and this number will only continue to rise as credit scores generally have quite a long delay between the action and a reflection on your score. For example, it can take over a year after your last mortgage payment before your home is foreclosed on and shows up on your credit report. To put this figure into historical context, the long term average for consumers with scores below 599 is around 15% of all consumers, 10% less than currently. While this is quite a frightening number, it is important to note that as little as three years ago American consumers had the most affordable access to credit in the nation’s history.

Reasons for this dramatic drop in credit scores are quite obvious but are only now starting to appear on credit scores. Currently 26 million Americans are unemployed, and the more these people rely on credit and fall behind on their bills, the lower their score will go. Every late and missed payment impacts your score, and for many their credit score is the first thing that drops when the hard times hit. The same goes for homeowners facing foreclosure. A consumer with a spotless record in the past can see their score drop by 150 points or more with a single home foreclosure. Clearly, until the macroeconomic circumstances can be addressed and fixed including falling home prices and stubbornly high unemployment, we should continue to see a rise in consumers who are in the least desirable 599 and below segment of the FICO score scale.

Luckily, there is some good news as well with this report released by FICO Inc. The number of Americans with scores above 800, the cream of the crop, has increased in the past few years. 17.9% of all consumers now have a score above 800, making them the safest bets for lenders. This is significantly above the long term average of 13%. While an exact reason for this can not be determined, it does show that more and more Americans are making their finances a priority. They have reigned in their spending, eliminated their consumer debt, and continue to save and invest their money to build a better future.

So readers, in which group are you? Have you seen your score drop over the past few years because of the economy, or are you actually improving your score by tackling your debt and becoming more educated about your finances?

Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.

For more information, please visit www.pfsdebtrelief.com or follow us on our blog at www.pfsdebtrelief.com/blog/ .

Contact:

Stephan Tavernini

stavernini@pfs1.net

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