How has the global financial crisis affected credit approvals
Only a few short years ago, just about anyone could get a credit card, a personal loan, a car, or a house. People who were self employed did not have problems getting approved and there were even some cases where proof of income wasn’t required, as long as the borrower had a decent enough credit score. Even those with absolutely terrible credit scores were still able to get a house or a car. Those days are truly over now. It seems like it was in fact the days of easy lending that placed the country (and the globe) in a financial crisis. The global banking system got so out of hand, that now, even those with excellent credit and a nice sized income could find it hard to gain loan approval for any size or type of loan. Even new credit cards are hard to come by these days.
So what happened? Put simply, the credit crisis began when lenders started approving loans for millions of people who could not afford them. When these same people inevitably failed to pay back their loans en mass, these lenders had to start writing them off as bad debts and recoup the costs by pursuing the sale of the client’s assets. As more and more people failed to repay their loans, more and more lenders where having to write-off these loans as bad debts, and investors and stock holders of these debt and loan-based investments were becoming more and more anxious. Ultimately, the banks and lenders were lending money invested by stockholders and investors and when these investors felt that the risks in these kinds of debt-based investments were too high, the global financial crisis took hold.
Have a look at this simple and easy-to-follow video that outlines how the global financial crisis took hold!
Ultimately, this crisis resulted in a loss of trust. This means that lenders couldn’t trust anyone, even those who would normally have no problem qualifying for a loan or a credit card. Currently, the global banking system is working to improve the credit crisis and restore the trust that once was there. It is not going to be an easy process though. Even though it only took a few short years for everything to come crashing down, the rebuilding process could take much longer than that and there really is no other way around it – rebuilding trust in any relationship just takes time.
In the mean time, you have to work extra hard at making sure that you would qualify for a loan in the event you need one. Some would say that you should simply wait for when the credit crisis is over, but when unexpected expenses or emergencies come up; there is no time to wait. This means that monitoring your credit report has never been more important. You have to make sure that you are working on building up your credit score, increasing your income, and making sure that your debt to income ratio is at the right level. By doing such things you will increase your chances of getting a loan when you need it, even during a global banking crisis.
The first thing you will want to do is to pull all three of your major credit reports together. These reports are legally yours, free of charge, once a year. This means that you can pull all three at once for free and then wait a year to pull them again for free or you can spread out the time in between pulling each one so that you are pulling your credit every so many months. However, every report may have something different to say about you. It may be wise to pull them all at once so that you can do an initial scan of your credit history. You may find errors on your credit report and if you do, make sure that you are taking action right away to resolve those errors. It could be something as simple as someone punching in the wrong social security number and there are accounts that are not yours showing up on your credit report. There could be tiny errors where your credit card company reported you thirty days late, even though you paid by the end of the month. And then there is a chance that there could be major fraud on your credit. Either way, no matter what the error is, you want to make sure that you are getting it fixed as quickly as possible. The credit investigation and repair process usually takes a few weeks to a couple of months.
Once you have made sure that everything on your credit report is correct, you should make sure that you are working on building your credit score, even during the current credit crisis. While there may be a wide-spread loss of trust, you should be able to get a loan or a credit card if you really need it as long as your credit report and your income shows that you are a good and trust-worthy candidate. The more prepared you are, the less the current global banking crisis will affect you personally. Prove to the lenders that you are not one of those people that they have lost trust within and you will be able to have peace of mind, knowing that you can gain credit whenever you might need it.