In a scene reminiscent of a time before the recession, GMAC, the lending arm of General Motors, announced that it will lower its lending standards in order to make loans to less qualified new car loan applicants. GMAC recently announced that that it would lower the minimum credit score required for financing from 700 to 621.
The real kicker is that the company had raised the minimum up to 700 just two months ago in response to the recession and market outlook. Has something drastically changed recently except for getting its hands on bailout money after being named a bank holding company? Isn’t relax lending standards what got us all in trouble in the first place?
According to Equifax:
- 15% of the U.S. population has a credit score below 600
- 35% of the U.S. population is below 670
- 50% of the U.S. population is below 710
- 70% of the U.S. population is below 755
- 90% of the U.S. population is below 790
So, now a majority of Americans can once again have access to loans when maybe they shouldn’t be borrowing money. I understand the need to stimulate the economy, but at some point more risk management needs to be used or the American taxpayers will never see the repayment of their billions and billions in loans.