Good Credit Score Importance Increases
Good credit scores are becoming more important than ever.
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As banks tighten lending standards, one factor; the credit score, is playing an increasingly critical role in determining the financial worth of consumers.
Lenders use credit scores to determine whether to approve or to deny credit and; if approved, at what interest rate. As lenders demand higher scores, more Americans are having trouble getting credit card and loan approval.
Some have worse scores and aren't getting loans at all; and, if democrats have their way, one of the last refuges (the payday personal loan) may also become extinct.
There are many reasons why consumers have bad credit scores... perhaps they lost their jobs, and/or didn't keep up with credit card and mortgage payments. Because these consumers now pose a high risk, credit card issuers have either closed their accounts or reduced credit limits. Because of the closed accounts and/or lowered credit limits, these consumers suffer even worse credit scores.
To add to their crisis, people who try to take matters in hand and pay to find out their credit scores discover that it can be difficult to learn the score that lenders actually use to evaluate them.
"Credit scores have taken on a new degree of importance," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, an industry group. "In the past it was a question of 'What will your interest rate be?', and now it's 'Will you even get a loan?'"
As a result, credit is less available to both low risk and high risk consumers at a time when they, and the economy, need it the most.
This is not only bad news for consumers... it's also trouble for businesses and the economy. When consumers cannot get approved for loans, merchandise, new cars and homes sit unsold.
People with a 700 credit score were once viewed as very desirable by lenders (most lenders use the FICO score, which runs on a scale of 300 to 850). But now, many lenders demand credit scores of 720 or higher. But it's not all the fault of consumers. Democrats are passing legislations which stifle; and may completely eradicate, bad credit loan offers. Instead of allowing free-trade within the credit industry which promotes competition amongst lenders, democrats are tying the hands of free-trade and pushing many subprime lenders out of business. Who's going to provide bad credit people with loans and credit cards? Government democrats who destroyed these loan options? Not likely. Review our Government Bad Credit Loan Legislation article.
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