The Credit Crisis And Your Credit Score
There is a credit crisis and your credit score is more important than ever. You may not know how your credit score effects you until you attempt to purchase a large item that requires financing or apply for a credit card. It is not only inconvenient to be turned down, it's humiliating. You are not alone, many now need credit repair.
There is a hidden danger that can be even more troubling for you, a lower score can impact the interest rate you are charged making it higher, and making the things you need to finance un-affordable.
How did this happen?
A credit crisis was created by greedy mortgage brokers and lenders that wanted to profit from the high number of refi's and home purchases during a period of low interest rates. The lower rates made equity in homes a source of income for cash strapped families. Many took cash out and paid high fees based on their low credit scores. As home prices dropped they were in danger of losing their homes or were put in the position of being 'upside down' in their loans since they owed more than the amount they could get for the property.
Additionally, many people who could not qualify for a loan at first, were made to 'qualified' by mortgage brokers who are now seen as unscrupulous. Many of these people could not afford the home in the first place but the broker was willing to manipulate their qualifications and often putting them into higher rate loans. These were the most attractive loans for the brokers since they could charge exorbitant loan fees, or points, and get a higher interest rate from the customer.
What can I do now?
All of us are impacted by the credit crisis. Loans are harder to get, even with decent credit scores and they are near impossible to get with any credit issues. This means we all need to improve our credit scores.
- Credit repair and vigilance is needed to weather the crisis and keep financing costs down. Use the 'snowball method' to speed up pay off debts. Concentrate on paying off one thing at a time, then roll that money to the next item and then the next until everything is paid off.
- Learn all you can about how to monitor your credit and build a better score. If you find you have credit issues on your credit reports, learn how to clean them up. Challenge anything that is not correct and get it removed.
- Keep some credit available. That means DO NOT MAX OUT your cards. One of the measures of your credit worthiness is having some credit available. The more credit you command and have available to use, the higher your score.
These steps take time, but it will pay off now and in the future.
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