Auto sales are at a 15 year low and expected to decline further next year. Contrary to news reports, it's been brewing for a while and not necessarily related to the recent "credit crunch."

A friend who is in the business said sales are off across the board. He said there is plenty of money to loan, but lenders are reviewing applications more closely and have tightened up a little on standards.

He said there are two basic problems right now. First, many people coming on to car lots are looking to trade an SUV or other gas guzzler and they are upside down. He said the average negative equity in an SUV right now is about $11,000. Even with a $10,000 rebate, they are still upside down and dealers can't absorb it in the deal unless the buyer has a bunch of cash to get it down to about an 80% loan to value.

The other problem is that consumers are over extended. He gave the example of a guy who lists his income as $150K. It sounds good, but he's got a mortgage, car loans for him, his wife, and three teenagers, plus five or six maxed out credit cards. Even if he's current, all of this affects his credit score and puts his debt/income ratio out of acceptable range, especially if there's a lot of unsecured (i.e. credit card) debt.

And here's something new to me. Anyone who has applied for a loan is probably aware of credit scores such as Beacon and FICO. But lenders are now also looking at a "DAS," or "delinquency alert system" score. While Beacon/FICO scores are a snapshot of a borrower's credit history, the DAS, also called a "bankruptcy risk score," is a predictive model that scores a borrower's likelihood of late payments or bankruptcy in the next two years. In some cases, a borrower can have a relatively good credit score but a high DAS score can kill the deal.

Bankruptcy predictors go by a variety of names and information regarding how they are calculated is hard to find. Equifax calls its product "Bankruptcy Navigator Index," or BNI, which identifies "customers who appear to be low risk, but actually pose higher than average bankruptcy risk." Experian's product is "BankruptcyPredict." They say it uses "age of trades, delinquencies, hard inquiries, balances, credit limits and balance transfers," and "credit reporting agency attributes and trending data, as well as transactional behaviors such as credit card transaction amounts, merchant category codes and cash advances." Some may also take MSA (metropolitan statistical area) demographics and combined history or other peer group data into account.

Sounds creepy! And if you've ever ordered your own credit report you'll notice it doesn't include your "bankruptcy risk score" because it's not covered by the Fair Credit Reporting Act.

Anyway, these "secret" bankruptcy risk scores may also be a factor in some consumers not being able to get credit. They're looking at bankruptcy and don't even know it!