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Top Reasons for Poor Consumer Credit Report

By Faye Mergel
Published: Friday, September 25th, 2009

An average person has thirteen credit obligations. Credit cards, auto loans, and mortgage loans are just some of the financial responsibilities that consumers face day to day. With huge and multiple debts, many Americans suffer financially. Managing debts is difficult for an average consumer which is why most people get a dismal look on their face when they view their credit reports. The fall in the job market is one of the major reasons why reports do not look good these days.

Top Reasons for Poor Consumer Credit ReportThe Bureau of Labor Statistics (BLS) says that unemployment rates as of August 2009 is 9.7%. However, some economic analysts argue that actual figures reach almost 17%. Whichever statistic is correct, it cannot be denied that a lack of income makes it difficult for many people to pay debts. Unfortunately, they go deeper into debt by applying for more loans, even to subprime lenders who have sky-high interest rates, just to meet their daily needs. This results in foreclosures and more files for bankruptcy.

Bankruptcy stays on a person’s report for 10 years. Defaulted loans and tax lien will not be removed for about 7 years. Applications for loans that are worth more than $50,000 are also a negative item and will be recorded by bureaus indefinitely. Real estate should be the primary investment of a consumer, but with high numbers of foreclosures piling up, credit reports are expected to look bad. With no loans available and no money in their pocket, consumers are forced to keep what little is left. This results in the economy slugging down even more.

Retail sales fell 56% between June 2009 and July 2009. Fiscal efforts of the federal government, such as the “cash for clunkers” program, are supposed to stimulate spending. With more active spending patterns, the government hopes that the economy will get back on its previous vigor. This, in turn, would have meant more jobs which could have solved credit report problems.
However, only the sales in the auto industry have risen, everything else fell down.

Nevertheless, consumers should not worry about this gloomy financial outlook of the United States. Former Federal Reserve Alan Greenspan says that the economy will grow by 2.5% before September ends. He stated last August that consumer spending is beginning to rise and there will be a definite need to increase production. This can only mean one thing: there will be need for more workers.  Hopefully, unemployment, which is the main cause of credit report woes, will be substantially lessened by the end of this third quarter.

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