Posted on Wednesday, 13th January 2010 by admin
As is often times the case, even situations as concerning as the current credit crisis have a silver lining. And in the case of the credit crisis, the lining is that the cost of big ticket items are falling. Plummeting interest rates with already lower asking prices combine to make now one of the premier times in decades to buy a home or a new automobile.
But there is a catch.
Not everybody can benefit from this great opportunity. Credit is more difficult to come by, hence the term “credit crunch”. After years of reckless lending and a record number of defaulted loans, repossessions, and foreclosures, lenders have had to become much more conservative in their lending practices. They are only willing to extend credit to the least risky consumers.
Lenders largely determine credit risk by looking at your credit score. A poor credit score tells them that you cannot be relied on to repay your debts on time. As a result lenders will deny credit to people they feel are too high risk, and charge higher interest rates to those who are an average credit risk to ensure they can still make their money back an then some even if a small percentage of those people are not able to repay the loan.
Today, lenders tolerance for credit risk is much lower than in previous years. A credit score over 750 is now required by many lenders to get approved for loans with the lowest interest rate and the best terms. A credit score lower than 750, and you have to pay extra. Too far below, and you run the risk of being denied for credit altogether.
But what happens if your credit report says you are a high credit risk, even when you aren’t?
Credit reporting errors, flawed scoring models, and irrelevant negative credit listings all work together to give many people a credit score that is not indicative of their actual credit risk. They are responsible consumers who can be counted on to pay their bills, but their credit scores tell a different tale. For people in this situation, fixing their credit score may be the best option for getting the credit score they deserve.
If your credit is holding you back, don’t just wait for things to improve. You have the right to a fair and accurate credit score and there are things you can do to fix your credit. Take action today and you may even be able to benefit from the credit crisis.
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Tags: Credit, Credit Crisis
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