Credit scores slide downward

Credit scores for a quarter of American consumers are now too low to qualify for a mortgage or credit card.

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    Customers exit a Chase Bank July 15 in New York. A recent FICO report says credit scores of a quarter of consumers have now fallen below 600. At those levels, Americans don't normally qualify for loans from banks.
    Mark Lennihan/AP/File
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Americans are sliding down the ladder of creditworthiness – and it's not at all clear that the slippage will end anytime soon.

In normal times, about 15 percent of consumers falls into the poor credit category with a FICO score under 600. In April, that figure stood at 25.5 percent, according to a recent FICO report.

That's a huge jump, involving millions of Americans, who now no longer generally qualify for a mortgage, a car loan, or a credit card.

The damage isn't limited to the lowest tiers of creditworthiness. At the top of the heap, the share of people with scores of 800 to 850 – essentially perfect credit – also slid from 18.7 percent to 17.9 percent in just two years. That was the biggest slide of any category during that period.

While that percentage is still well above the historical norm of about 13 percent, it suggests that the strengthening of Americans' balance sheets during the decade has now been thrown into reverse across the spectrum of borrowers.

There was at least one bright spot in the report. The slippage from April 2008 to April 2009 seems to have slowed in the latest 12-month period, according to a blog by Tom Quinn, the company's product manager of FICO scores.

Nevertheless, the continuing high rate of foreclosures and unemployment and a looming second dip in housing prices suggest the credit picture could worsen before it improves.

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