Recession has taken a grip on the American economy. With plunging home values and increasing foreclosures, the common man is having a harrowing time. Now the Americans’ credit scores are at an all-time low. The 3-digit number that determines whether one is entitled to a loan or not is the credit score and that has hit an all-time low.

The credit score of millions of consumers has gone for a toss. This means they can borrow money only at a higher price. If the credit score has dipped even below the acceptable limit, then an American will not be able to borrow money at all. Lenders have now become stricter and they will lend only if a borrower has very high credit scores.

The Fair Isaac Corp has marketed the concept thoroughly and now an average American knows that the scores can range between 300 and 850. Fair Isaac’s FICO score is something that all lenders go by. Even employers scan it at the time of interviews, so do insurers while issuing home and auto policies. Landlords are not an exception as well. They take the score into consideration before renting out space.

It has been estimated that Americans carry a consumer debt of $2.56 trillion. Federal Reserve estimates that the figure is higher by 22 per cent than what it was in 2000. The average American has a credit card debt of $ 8,565, which is almost 15 per cent higher than what he had in 2000. What is interesting is that not only subprime borrowers but also the prime borrowers have a poor credit score and account for a large chunk of foreclosures.

The credit scores have taken a beating because of two major factors. Consumers are running late on payments because of the general recession and credit-card organizations have brought down credit limits. A homeowner who chooses to leave his foreclosed property automatically runs a low credit score. Consumers who are 90 days late in payment also have a poor score.

Fair Isaac reports say defaulting on credit card payments, foreclosure filings on house and bankruptcy are taken into account while filing a person’s report card and it stays there for 7 years. All said and done, one bad account like foreclosure is still better than bankruptcy which means a person has defaulted on many accounts.

However, Fair Isaac has not classified any account as good or bad. It says such things cannot be generalized and depends on individual standards.