It seems the banks are still reducing their credit lines, into the first half of 2010. This means it will continue to be a challenge to get credit, whether your credit history is perfect or not.
In fact, now may be the best time to apply for credit. The banks will continue to reduce their exposure to borrowers over the course of the year. That will make it more and more difficult to get new credit lines or to increase existing ones. Either you won’t get a loan, they will ask for more security, or you will be charged a higher interest rate.
The Banks Need To Reduce Credit.
Since the housing bubble burst, the banks have been forced to reduce the amount of credit available. This is because housing prices have collapsed. People are no longer able to use their homes as an alternative source of income by accessing their equity. So, the banks are reducing credit to prevent borrowers from using loans to pay for their living costs.
The cuts don’t just target the most vulnerable borrowers. It is across the board and affects everyone. It doesn’t matter if you are a local government, a Fortune 500 company, or a private individual trying to make ends meet. Everyone will be facing higher borrowing costs as the year progresses.
Why Will Borrowing Costs Rise?
This is primarily due to the upcoming Social Security costs, military expenditures, health care reform, and bank bailouts. Individually, any one of these can raise the cost of credit for you and everyone else. But, together, they are an almost guarantee of higher costs for years to come.
As the government increases its borrowing to meet these demands, everyone will have to compete to get access to credit. Because of this, it can be argued that you should borrow today, rather than tomorrow to take advantage of the lower interest rates and more plentiful credit. So, if you are thinking about a new car, a new house, or college education, now may be the time to access the credit for them.
Before you decide to go into debt, to save on interest later, it helps to have a clear idea how you are being represented to potential creditors. Considering that most credit is long-term, it may be worth the effort to take a look at your credit reports before applying. You can almost be assured that inaccurate information on your report will be used against you to increase your costs to borrow.
Monitor Your Report.
The best way to track what is in your credit file is to do it yourself. Find your own tools and don’t rely on “specialists” to do it for you. Only one person is in the best position to contact the credit reporting agencies, creditors, and the attorney general, and that is you.
A few resources to try, that are popular with those who monitor their own credit are…
MyFICO Credit Scores,
Equifax Credit Watch, and
Credit.com Bureau Watch.
Each of these will let you access and monitor your credit reports, send you updates, and give you a chance to correct information before you apply for credit.
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