I’ve been reading a lot about our current financial situation and what Congress is trying to do to fix things, and something in a recent article caught my eye. This article discussed what we should know about the current financial crisis. There was a lot about WaMu and FDIC and SIPC insurance, but the point that caught my eye was about credit.
According to economists, consumers trying to borrow money for a loan or a home or trying to get a credit card might find it much more difficult. One key point here was that credit card companies are less likely to take on “riskier clients,” and are “getting tougher on who they lend money to.”
This… doesn’t seem like the world’s worst idea. Of course, I realize that there are some people who are using their credit cards just to get by – they use them to buy food and pay bills. But there are many more people who are spending on their credit cards because they can. Maybe it’s spending on big ticket items, like a new television or video game system, or maybe it’s a lot of smaller expenses, like frequent dinners out. Either way, taking a second look at people in this situation who are looking at getting new credit cards might not be a bad idea. Maybe this is what we need to teach us how to spend properly.
It may also be harder for people to get mortgages due to stricter lending requirements. I was listening to a co-worker talking the other day and he was saying that when he bought his home 25 years ago, he couldn’t imagine not having a 20% down payment. According to what he knew, that was just what people did. I’ve heard similar from my parents. Of course, even if you factor in inflation, a 20% down payment now is more than a 20% down payment in the early 1980’s.
This also doesn’t seem like a bad idea to me. Sure, it means that people will have to save that much more before buying a home. Or they will have to buy a smaller home. But I would think that stricter lending requirements make it that much more likely that a person will be able to continue to make their mortgage payments and not risk foreclosure.
I do realize that this will hurt people, and I don’t want to sound callous. But maybe if the bank or the credit card company isn’t willing to take a risk on you, you should take a second look at your spending and see what you can do to change.
I think you’re right, Megan. I haven’t used a credit card in over 4 years – I went through a credit counseling program. I’ve been finished with that for several months and had a stellar record with the program. B of A declined to give me a cash back card when I applied last week. They want to see more like a year after the program of “good behavior”. Makes sense. *I* know I’m low risk but seeing that I went through a program like that is an understandable red flag.
I do have pretty good credit overall, though – last time I checked my FICO was over 700. I asked Citibank to just reopen an old card for me. Maybe I’ll have more luck with that. We’ll see.
Regardless of what happens with that, it does seem that the companies are becoming much more gun-shy. And I don’t blame them. If I don’t get access to credit soon, I’ll live. Either way I’ll be continuing to live below my means.
These times are certainly interesting! And credit is what makes the country, businesses and people run…
I have to agree. At the same time, I don’t want it to be impossible for people to re-establish credit after having trouble. And I’m soooo glad that we were able to buy a home with 0% down (2 loans – main & secondary). We had a very high credit score (above 800). When we sold a few months ago, we had over 40% in equity, despite the drop in value. Still, I know that we were (and are) the exception.
My opinion is that you should be wary even if the credit card company IS willing to lend you money. If you can’t pay off the full balance every month, you need to think hard about why you think you need it.