If millions of homes are being foreclosed then it must follow that millions of previous home owners now have trashed FICO scores. There are supposedly at least 25 million bad subprime loans in or near default so it follows that at least 25 million or so people have had their scores trashed. If “bad credit” stays on credit report files for at least seven years and if the majority if these loans are going into default from 2005 thru 2009 then any real credit recovery won’t be feasible for at least 2012 (2005 + 7 = 2012) thru perhaps 2016.

Of course there are way more than just subprime loans in default and that adds a few other million so from the sheer number of trashed credit, it’s not realistically feasible to see a recovery of epic proportions anytime soon.   Making the situation much worse is the fact that banks are cutting credit line exacerbating the problem for credit card holders.   Many people are seeing credit lines cut in half or worse and the resulting effect is a significant drop in FICO scores across the board.   The result here is even more FICO scores trashed.

The question that is begged of course is what happens when nearly everyone has a trashed FICO score?   Does 600 become the new 700 on the FICO ladder?  Does everyone become subprime at some point?   Will we all have to pay 30% for loans of any kind?