FICO Scores are Starting to Drop - But Why NOW?

Back on August 10, 2008 I wrote a blog post about the tightening credit and its ramifications and I ended the title of it with "...and Watch Your FICO Scores DROP!"

And it's begun to happen - I just don't understand why it didn't start sooner. When some of your available credit is taken away your ratio of outstanding debt to your available credit changes, for the worse. Whereas you may have had a credit card with a $10,000 credit line and only $2,500 owed on it you had a 25% debt ratio. If they reduced your credit line to $2,500 you would now have 100% debt ratio - not good for your FICO score.

I have monthly monitoring of my credit reports and score and have been surprised to not see any change at all to my FICO score even though as with many others I have had credit card companies reduce some of my credit lines.

But today I checked my daughter's report and saw her score dropped 28 points and yet not one thing has changed in her file since last month and surprise of surprise, last month it dropped 28 points as well! Absolutely nothing in her file had changed over those two months but her score has dropped almost 60 points. She has "excellent" in all the categories except for "length of credit history" because she's only got a few years of history.

I hadn't gotten my monthly notice on my account so I popped over there and lo and behold my FICO score is now beginning to drop as well.

What does this mean? Well, I'm not sure...it should have happened months ago when credit began being shut off, but it didn't.

But now suddenly the scores are adjusting downward. Odd isn't it? The government is pushing for the financial institutions that they gave bailout money to to actually use it to give credit to consumers again, but suddenly all of us don't look as good on paper any more - in some cases for no apparent reason. Are these institutions now going to point to our lower FICO scores and use it as an excuse not to lend?

Just what is going on? Seems like your guess is as good as mine, but it doesn't look good any way you look at it.

"The Power of One" - Staying Focussed

I read this and thought it was very to-the-point and addresses a lot of what I take issue with in the way government officials act. You can't do everything and make everyone happy, especially in a crisis. Politicking and pork in an Economic Stimulus Bill for this economic crisis is unacceptable to me.

This is actually the end of the article, but if you'd like to read the full story go to: http://www.sovereignsociety.com

Their articles can be "edgy" but always give me food for thought.


THE SOVEREIGN SOCIETY OFFSHORE A-LETTER Wednesday, February 25, 2009 - Vol. 11, No. 52 -

An Open, Candid, and
Non-Partisan Response to the President

Second: Clean up Your Message and Acknowledge the "Power of One"
...Fix the Economy first, and THEN we'll Cure Cancer

This point is ancillary to the first, but it's just as crucial in terms of maintaining the kind of market confidence we'll need to get the economy growing sometime in the next few years;

What's your angle? What's the "shot"...what's your line?

Is it fixing the economy? Then talk about fixing the economy. Don't give us an hour of the same promises we've been spoon-fed by years of politicians. Alternative Energy? Gas is less than two bucks a gallon right now...people would much rather hear about how you're going to keep them working. Reforming Healthcare? Aren't we in the middle of the biggest crisis since - and perhaps even greater than - the Great Depression? Improving Education?

Mr. Obama; you're done campaigning. You've already got the Office, and words won't fix the economy.

Moreover, last night's speech seemed to reflect the compromised and...shall we say "porky" nature of the recovery bills so far passed by a Democratic Congress. US$700 Billion to fix the banks? Yeah, let's throw another US$180 Billion in useless favors on there (like wooden arrow shafts and mining gear) so we can get the votes. Biggest spending bill in American History? Let's throw in a Maglev from Disneyland to keep Harry Reid happy.

But your speech last night - and the aforementioned recovery bills - seem to be rife with "You scratch my back..." politicking. This kind of "governing" (we use the term loosely here) won't convince the people or the markets that the water's safe to start swimming again. It will make them feel like their health and welfare hang on whether or not we've done enough "favors" for the politicians, bureaucrats and sponsors standing between them and the government actions necessary for a swift recovery.

As such, and combined with your flawed perspective on banks and lending, we do not believe that your actions since taking office are likely to enhance America's prospects for a smooth and swift recovery.