Just a year ago, a credit score of 650 seemed like a sure bet to land favorable financing rates to buy a car, purchase a house or receive a credit card.

However, today's environment of nearly frozen credit markets and shrinking economy has changed all of that, placing a premium on credit scores well above 700.

“What used to be called good credit is no longer considered good enough,” said Todd Huettner, owner of Denver-based financial firm Huettner Capital. “Prior to a few months ago, there was no difference between a score of 620 or 820 for most loans.”

The stricter lending standards have hurt consumers hoping to take advantage of low home prices, and thrown more obstacles in front of struggling businesses.

“You definitely need a score more like a 750 or higher. In the past, you would be fine with a 650 or higher. That’s a pretty big difference,” said Emily Peters, a credit expert at Credit.com.

Individuals with a 750 credit score have a long history of “near perfect” credit activity, said Peters. These consumers don’t have an excessive amount of debt or any recent collections activity and consistently make their payments on time.

“Generally speaking, we have seen that lenders are being much more cautious about extending new credit, so only the most highly qualified are going to get approved in the current environment,” said Demitra Wilson, a spokeswoman at Equifax (EFX).

Peters said she’s heard from many customers who were frustrated with the current credit conditions.

“We’ve seen a lot of people who say they didn’t need the loan a year ago when they could have had it,” said Peters.

Consumers aren’t the only ones frustrated.

“It is a very tough market place,” said Marc Cannon, senior vice president of communications at AutoNation (AN), the largest auto retailer in the U.S.

Cannon said customers with a credit score of 650 and above had a 90% chance of receiving an auto loan a year ago. Now, he said that rate is 60% “and dropping," adding, “it’s very tough to get them into a car.”

The situation has only worsened as credit markets locked up since the summer.

“It’s clearly deteriorated. September we were in a credit crisis. At the end of September we were in a credit panic,” said Cannon. “Still today we are clearly in that panic.”

GMAC Financial Services, the financial arm co-owned by General Motors (GM) and Chrysler parent Cerberus Capital Management, said earlier this month it will limit auto financing to customers with a credit score of 700 or above due to the “lack of stability in the global capital and credit markets.”

Robert Nunez, a residential lender based in Dallas echoed that sentiment, saying a borrower with a score of 620 can no longer receive a conforming mortgage without a down payment. Similarly, a jumbo mortgage of more than $400,000 now requires a minimum score of 650 to 700, up from a minimum of 620 a year ago.

“Ultimately in this market, it does require a bit of a higher credit score and more money down,” said Nunez.

According to Fair Issac, which maintains the widely used FICO credit score, 58% of individuals are “prime,” meaning they have a 700 FICO credit score or above.

“But the majority of people actually seeking credit is a far different demographic,” said Peters. “Unfortunately those fringe borrowers are actually the majority of those looking for credit. A lot of the people who have good credit don’t need to borrow right now.”

The changes in credit scores are a reflection of an economic picture that has only grown drearier over the past year.

“The economy is different from what it was a year ago. All of the indicators point to the fact that we are in a recession,” said Keith Leggett, economist at the American Bankers Association. “Banks have become more risk-averse.”

Major lenders echoed that sentiment, saying they have been forced to tighten standards for everything from mortgages and home equity loans to credit cards and auto loans due to the current conditions.

“Like everyone else in financial services, Wells Fargo has adjusted underwriting standards to effectively manage risk in this difficult credit environment,” Wells Fargo (WFC) said in a statement. “Our success as a consumer lender and servicer depends on approving a loan only when we believe the borrower can repay it according to the terms.”

HSBC (HBC) acknowledged its businesses have “steadily tightened credit criteria, including credit score hurdles, over the last several months.” The U.K.-based lender wouldn’t give specific credit score criteria.

Market conditions have forced Citigroup (C) to make several adjustments, including a new series of credit card limits and tighter criteria such as rising minimum score requirements for cash advances, the company said.