Higher Credit Scores Seen on the Front Line of Debt

Consumers seeking help have higher incomes and credit scores.

COLUMBIA, MD (February 24, 2009) – Consumers considered safe lending risks a year ago are finding it more difficult to borrow now, despite their qualifying credit scores. More significantly, as credit is restricted and incomes are impacted by job losses or frozen wages, consumers are finding that lifestyles fueled by easy access to credit have left them without the tools to live within their means, save for the future and pay down debt.

This picture of the front line of debt emerges from data collected by CareOne Services, the nation’s largest and most established debt management company, who is seeing more customers with higher incomes and good credit scores calling for help. Trends that CareOne has identified include:

• - A 15 percent increase in overall inquiries from a year ago
• - A nearly 7 percent jump in the number of consumers with credit scores in the 650 -750 range calling for financial help or to start structured repayment plans
• - A small but significant 2 percent increase in inquiries from consumers with annual incomes of more than $50,000

“In the past, people with higher credit scores have not had to actively budget. They haven’t needed to differentiate between their wants and needs. Now they are facing an urgent need to exercise their thrift muscles,” says Mike Croxson, president of CareOne.

In January, CareOne handled nearly 65,000 inquiries from consumers who are seeking advice and assistance to get a better handle on their finances. This is a 15 percent increase from a year ago, and the volume of inquiries is not projected to decrease.

However, while the average amount of debt that CareOne clients carry remains the same, the new trend in the debt management industry is the type of client. CareOne is fielding more calls from consumers with credit scores in the 650 to 750 range, generally considered fair to excellent credit risks, and many are becoming customers.

According to Fair Isaac Company (FICO), a credit score of 750 and higher is considered excellent, 700 and above is good while 650 and up is fair. A credit score of 600 or less will make lenders consider a consumer a poor risk.

Croxson says the average CareOne customer has historically had a credit score below 550. But in January 2009, his firm noticed an increase in customers with credit scores above 551, and a majority of that growth came from clients with scores of 651 or higher.

“Consumers built a lifestyle around a certain income base,” says Croxson. “ As the recession continues to take a toll on markets, unforeseen circumstances such as job loss and increased interest rates on fixed expenses are making it harder for consumers to manage and stay on time with financial commitments,” says Croxson.

Some consumers are finding their credit scores drop when credit card companies slash credit limits. Economic factors are also contributing to consumers’ credit worthiness, or likelihood that someone will be able to repay as banks and credit card companies evaluate their policies.

“We have typically served customers who earned $35,000 - $40,000 a year, but now as more people in higher paying jobs are being laid off, we are seeing for the first time an increase of customers with annual incomes above $50,000,” said Croxson.

Croxson says this new trend is just beginning to impact the credit counseling and debt management industry as consumers with higher credit scores and household incomes are usually unsure where to turn for help or how to take the first steps to financial recovery. Complicating an already complex situation are the daily headlines revealing new investment fraud scandals that take advantage of consumer trust.

“We must be vigilant about ensuring reputable credit counseling and debt management firms and programs are there to help consumers break the cycle of debt,” Croxson says. “As our nation evaluates new regulations for the banking and credit industries, this is also an opportunity to create a nationwide standard for our industry to protect consumers from unscrupulous debt management and debt settlement organizations who see this economic disaster as a chance to line their own pockets.”

For more information about CareOne Services, visit www.CareOneCredit.com.

About CareOne Services

CareOne Services was formed in 2002 to provide consumers with multiple solutions to complex money problems. CareOne Services Inc. boasts a unique Financial Fitness Center that examines each consumer's individual financial situation and develops a personalized solution to help the consumer get out of debt and strengthen his or her financial footing.

CareOne Services has helped millions of customers successfully overcome financial instability and continued giving them the confidence to manage their money successfully. CareOne takes a holistic approach in assisting customers to manage their debt, looking at an individual’s situation and creating a solution that is achievable and works. CareOne does not offer to change or improve an individual’s credit score. CareOne goes beyond providing the standard debt payment programs, helping consumers address day-to-day life issues that are the result of being in debt along with free educational tools online.