When Will Creditors Really Loosen Up?
It still seems that credit is a bit hard to find these days. Whether you are a business looking for a business loan or line of credit, or an individual consumer looking to get a mortgage, second mortgage, or even a general loan, it’s tough out there.
Creditors have tightened their purse strings and are only giving money out to the people who pass the highest and most stringent credit tests available, including the increasingly important FICO score which is used by creditors as a comprehensive story of your credit history and likelihood that you will be a good lending risk for them.
I’ve said it many times too. I used to get indundated with credit card offers, loan offers, and the like. Now, I rarely ever see one come in the mail. And my husband too. We both have good credit so this is surprising, and we both make sure we pay our bills on time.
Aside from a brush with a lot of credit card debt I had in college, which was resolved over ten years ago, my credit record is pretty darn good, and I’ve never been “delinquent” on anything. I even pay things off early. Wait, maybe that’s why they don’t want me!
This strategy for creditors is helping them cut their losses from millions of dollars in bad loans, credit cards that were never paid on time and went to collections, and homes that went into foreclosure for which they never gained back the fair value. These are the stories that you hear about every day. Except it’s not only the banks suffering that lend the money, this is a tale that shows the suffering of the public as well.
My hunch is that we will start to see more free flowing credit in all market sectors like credit cards, loans, mortgages, and general or home improvement loans, in the next year or two. Even then, some companies have pretty much stated in so many words that they will stick to more conservative lending practices for good.
They may have to, if the government gets it’s way. Many people are pushing for more government oversight in the financial services industry since the loose lending and greed that occurred in housing won’t happen again and cause a virtual economic collapse like we saw starting in 2008.
It’s imperative that we get credit flowing again on at least a moderate basis, to spur the economy to where it needs to be now. We need people to get jobs, which will result in a sustainable recovery, not the smoke and mirrors recovery with false optimism that I feel we are experiencing a bit of now. When the jobs start rolling, the credit will as well.
