Credit Cards For Less Than Perfect Credit

Americans may have a more difficult time securing loans, competitive rates and credit cards with low credit scores

As the U.S. economy struggles to recover and unemployment rates remain high, Americans may have another issue to worry about before they can improve their personal financial situation – their credit scores. A new report – released by FICO – reveals that Americans’ credit scores have dropped to a new low, endangering consumers’ ability to secure loans and competitive rates for home and auto loans as well as credit cards.

Citing data from FICO, the Associated Press reports that 25.5 percent of American consumers – which roughly translates to 43.4 million individuals – carry a FICO credit score of 599 or below. The FICO credit model measures the financial strength of an individual and assigns them a three-digit number between 300 and 850 based on their credit health. According to the model, a rating of 599 or below is considered “bad credit.”

Heavy reliance on credit prior to the economic collapse is considered one reason for sinking credit scores. Following the subprime mortgage and employment crisis, many Americans found themselves unable to meet their financial obligations, forcing them to default on mortgage and auto loans and begin a dangerous cycle of credit card debt. Every late payment is reported on a consumer’s credit report, causing their score to sink lower.

According to the Associated Press, more consumers are likely to join the ranks of those with less-than-perfect credit ratings. It can take a period of a few months for missed payments or defaults to affect a consumer’s credit score. As millions of Americans are still facing unemployment or foreclosure, it is likely that credit scores will continue to decline. Additionally, the American Bankruptcy Institute estimates that bankruptcy filings – which heavily impact credit ratings – will grow to nearly 1.6 million by the end of 2010.