FICO scores will drop for most of the people in the U.
S.
With the melt-down of the housing market and the economy in general, you can expect some big changes in the credit industry and how your credit affects your ability to borrow money.
All of these changes will impact you directly.
The coming changes will affect you in buying houses, cars, obtaining insurance and a whole range of other ways.
I have been doing so much public speaking on this subject that I have condensed the words to "ficodrop.
" Credit is becoming harder to get and the criteria for borrowing money is tightening dramatically.
In 2004 and 2005, people with 550 credit scores qualified to buy houses with 80-20 loans and little or no down payment.
Things are quite the opposite now.
Money is scarce and the people with excellent credit are the ones who present the least amount of risk to a lender.
The key word here is risk.
The coming change in credit evaluation is simply risk management by lending institutions.
Lending risk is similar to issuing insurance policies.
A bad driving record will result in higher premiums or denial of insurance.
A low FICO score will result in very high interest rates or denial of credit.
The coming changes will raise the number you need to reach in order to be above the waterline.
The tide is now rising.
Along with the tightening of lending criteria will come a drop in almost everyone's FICO score and apparent financial position.
The more scarce money becomes, the more your credit will be inspected and examined if you apply for any type of loan or insurance.
Anything that can be perceived as a potential risk will cause denial of service.
Yes, your FICO score affects your insurance premiums.
The insurance companies have gathered data which shows that people with lower credit scores have more traffic accidents and homeowner claims.
They say that this is because people who use poor judgment with money matters use poor judgment and engage in risky behavior when operating a vehicle or properly maintaining a property.
When you apply for insurance, they pull a "soft" credit report.
If your FICO score is below a certain number, your premiums will be higher.
A soft inquiry will not lower your score.
This is called your "insurance score.
" If you are right at the credit waterline now, expect a jump in your premiums when renewing insurance policies, regardless of the type of insurance.
If you have not been paying close attention to your credit reports, now would be the time to take a long, hard look at the condition of your credit.
The sooner you get your credit in order, the easier it will be for you to weather the coming credit storm.