October 20th, 2008
Credit Scores and the Economy
Because the economy is sinking, we are finding that credit scores are rising significantly in their importance. In today’s apparently struggling economy, creditors are tightening the reins when it comes to how they lend. This is leaving many people to wonder if their credit is still good enough to seek the lending that they need when they most require the assistance. According to many credit counselors, however, credit scores are becoming drastically more important than before because a credit score level that was good enough to get a loan in the past is probably not going to cut it as easily today.
Experts working with credit counseling companies are saying that a struggling economy is going to mean that loans are that much more difficult to get. A lot of people are seeing their credit scores dropping at the same time that many creditors are simply going to demand higher scores in order to obtain lending, which is going to be a double whammy for a lot of people.
A credit score is basically an average of how good or bad your credit is. It can affect the results when you are applying for a loan, and can mean a higher interest rate or no loan at all if your credit score is not good enough. Credit scores run from 300 to 850, but only 11 percent of the population can score 800 or higher. If your score is above 720 then you are doing just fine in general, so do not worry about your score if you are above this amount.
Here are some suggestions for keeping your credit score up, even in an economy that appears to be falling apart: For starters, pay your credit card bills on time, because debt that rolls over from month to month can really hurt you. If you have $1000 run up on a credit limit of $2000, you might think you are doing ok – But using half of your available credit is actually a score killer and can be doing much more harm than good if you are not making a real effort to get it paid off as quickly as possible.
Closing a credit card account is never going to help you raise your credit card, so keep them open even if you are not actively using them. If you have low credit or bad credit you can still obtain a loan, but it will really depend on the lender, the down payments and the interest rates that you find yourself facing.
Simply put, credit scores and reports are becoming even more vital than ever now that lenders are becoming stricter about what they lend and who they lend it to. If you need a loan or a credit card, you absolutely must have a decent credit score if you want to get anywhere without incurring enormous interest rates and fees in the process, so plan ahead.
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