Credit ratings took a hit when the market slowed in 2007, and many buyers are now left without financing options. Or are they?

There were many outcomes of the housing boom and bust cycle, but one of the more implicit has been lowering consumer credit scores, a detail that has posed problems for prospective homebuyers seeking a mortgage for their transactions.

According to the latest data from FICO, which develops the dominant credit score in finance, from 2008 to 2009, roughly 50 million consumers in the U.S. lost 20 points on their FICO score, with 21 million of them losing more than 50 points.

Further complicating matters, as Kenneth R. Harney of the L.A. Times points out, is that the drop in scores coincided with a dramatic increase in lending standards from the nation’s biggest banks, and many consumers have been left without many options for financing their home purchases.

As a result, cancellations have risen and average credit scores at all financial institutions have also risen, by dramatic levels in some circles. On the cancellations front, the National Association of Realtors reported last month that 33 percent of its agents admitted to experiencing contract failures, a big jump from the 8 percent in 2010.

For average credit scores, FICO averages at Fannie Mae and Freddie Mac are up to 760, while averages at the Federal Housing Administration (FHA), long a safe-haven for low-credit homebuyers, has risen to 700. Between the three GSEs, average credit scores rarely rose above 600 during the boom years.

The situation looks scary, but there is still hope for prospective homebuyers, and its name is the FHA. As we’ve chronicled on numerous occasions, FHA financing has been just short of a godsend for the housing market, accounting for 14.84 percent of total home purchases in 2011, a dramatic increase from the 4.12 percent of purchases in 2007.

Long berated as a low-income, low-quality housing loan, prospective homeowners have flocked to the FHA in droves to take advantage of the agency’s low down payment requirements and more accommodating credit scores. In fact, so many have gone to the FHA that the average credit scores cited earlier may be distorted, due to the influx of well-off, middle class buyers now using FHA financing.

With Congress recently approving, with a decisive majority, to raise FHA loan limits, the loan option’s importance, at least in the short term, seems to have been verified with bipartisan support.