National credit score averages are dropping
OnlineGuideTo.com — As more Americans are struggling to pay their bills, national credit score averages are dropping.
Since over 200 million American consumers have credit scores, a change of even a few point in the national average is a significant indicator of the nation’s financial health, USA Today reports.
From the third quarter of 2008 to the first quarter of 2009 — the latest data available — the average TransUnion credit score dropped 6 points to 651, the credit bureau says. Scores fell more dramatically in states hardest hit by the housing bust: California saw a 10-point drop, for example, and Arizona, 11.
“Consumers are feeling the bite of the current recession,” says Ezra Becker, a director in TransUnion’s financial services group. “With delinquencies showing up in credit files, it’s not surprising that the average score is decreasing somewhat.”
Becker believes credit scores aren’t likely to improve — and could even drop further — through the second quarter of 2010,
According to the Federal Reserve, in the first quarter of this year credit card late payments hit a record high of 6.5%, while write-offs reached 7.5%, a near-record high.
A good credit score is considered to be 720 points.
Credit scores are negatively affected when credit holders can not pay their bills on time — if at all.
Foreclosures also have a negative effect.
However, actions over which consumers have no control may also contribute to a drop in the ratings. For instance, over the last half year banks have been closing record numbers of credit card accounts, while reducing remaining credit lines. In many cases those actions have less to do with your financial health than with the desire of banks to sandbag their assets. Still, they do have a bearing on your credit score.
Lenders have also taken other actions that generally negatively affect credit card holders.
What you can do to protect your credit score
- Pay Your Bills On Time
This seems like a no-brainer, but countless people wait till the last moment — or byond — before they pay their bills. Paying your bills should come first — before that next trip to the restaurant or the shopping mall. If and when your account is evaluated, how soon you pay your bill after it has been issued plays a big role in decisions regarding your line of credit. - Limit The Number Of Credit Cards
Use up to three cards, and put the rest on ice — literally, if you have to. These are your frozen assets. Do not close credit accounts, as doing so will likely affect your credit score in a negative way. - Do Not Overuse Your Credit
A good rule of thumb is to use no more than 30 percent of your available credit. It’s OK to carry a low balance on each card, but it is best to always pay more than the minimum amount due, and from time to time to pay off the entire amount. - Limit Other Debts
Your financial life is an open book to the credit reporting agencies. Not just your credit cards, but every other official financial transaction is known to them. Be conservative in how much you borrow, and consistently make timely payments. - Keep An Eye On Your Credit Score
You can get one free credit report from each of the three credit reporting agencies every quarters. Access them via AnnualCreditReport.com. When you visit that website, be sure the address in your web browers begins with https — instead of http. The s indicates a secure connection.
