Importance of Good Credit in Bad Times

Loan Approved

Loan Approved

The American economy is not in good condition with the debt crisis, stock markets plummeting, high unemployment numbers and the number of people in poverty at record rates. In difficult financial times it is more important than ever to maintain a good credit rating particularly if you are going to apply for a loan for a car, put a student through college or get a home mortgage. Many financial institutions are in ‘survival mode’ at the moment. Banks and private lenders have learned their lessons about giving loans to risky borrowers.

Lenders tighten credit criteria

Lenders are definitely tightening their credit criteria for loans, mortgages, and credit card approvals. Many lenders suffered major losses from customers who defaulted on loans in the past few years. With economic conditions the worst since the Great Depression, only those with good or great credit will be able to take advantage of available credit. Things you may be confronted with if you apply for any kind of loan or credit card are requests for additional income verification, verifying employment, reviewing multiple credit reports, reviewing payment history on cell phones, or looking at your checking account history. Secured loans such as those for cars or homes may take larger down payments. Credit score cutoffs are also higher.

Get to work on your credit score

If your credit is less than stellar there are things you can do to improve matters. Even when times are hard it is possible to improve your credit score. Although it may be easier, you don’t necessarily have to use a credit repair company. Get copies of all of your credit reports from Experian, TransUnion, and Equifax. Make sure all the information in the report is true. Start working on your current credit card bills starting with the cards with the highest interest. Getting an extra part time job could make all the difference in making a dent in your credit card bills. Make a budget and stick to it.

Is there a silver lining to the financial crisis?

If you have good credit currently you may be able to take advantage of the current Federal prime Interest Rate which is now 3.25%. It is a great time to buy a home or a car or refinance your loans. If you have a credit score of 700 – 850 you will be able to get a great mortgage rate. Business advisers tell us that businesses and individuals don’t run and hide when times are tough. If you are in good financial condition now is the time to capitalize and go shopping. During an economic downturn lots of things are on sale. You can get great deals on real estate, facilities, equipment, and business services. If you run a business it can also be a great time to find good employees who are willing to work for lower salaries.