The bad news first (as if you needed to hear it again). At this very moment we are experiencing a "Credit Crisis" as the U.S. economy struggles to maintain it's ability to keep our head above water. Banks are failing, gas prices are on the rise, foreclosures have increased while home values have plummeted. What a mess!!
So why is it important to repair your credit now? Simply put, due to lax credit requirements in the past which brought us to this point, future requirements are going to be very strict to say the least. A projection that everyone extending credit and financing will increase their requirements regarding credit profiles and credit scores is inevitable. As this will help to correct many problems that have created the current economic woes, it's going to leave a vast majority without the credit worthiness needed to acquire that which they seek.
Doing everything to restore and improve ones credit now is going to make the difference between those who have, and those that have not as lender requirements increase. We are not sure how strict these requirements will be or when they will stabilize as the standard requirement. What we are sure of is the old "catch 22″, You need good credit to get credit and what was deemed good credit in the past, will not be sufficient for those same goods and services we once accessed.
Acting now to repair and restore your credit can help to ensure you have access to credit in the future. Fear of the current credit crisis has credit card issuers lowering credit limits and suspending credit lines, especially if there have been recent delinquencies. Decreased credit limits can in turn lower credit scores as the ratio of amounts owed to available credit, increases. The domino effect ensues and now lower credit scores result in existing creditors invoking the universal default clause, raising interest rates, or even closing those accounts. Of course applications for new credit may be denied as a result of lower credit scores.
The automotive industry is also in flux. Although currently purging large vehicle inventory with lower price incentives and lower interest rates, the current spike in auto loan defaults will probably result in much higher credit requirements to qualify for purchases or refinancing in the future. Getting approved for a loan is one objective, but at what cost? Lower credit scores equate to higher interest rates. Repairing your credit now can save you thousands of dollars in interest over the term of what would have been a high interest loan.
Want to by or refinance a home? Maybe you were pre-qualified at some point in the past or even during the mortgage debacle. Check again! If there is any area of lending and financing that will increase it's requirement for good credit, this is it. In fact good credit as we know it today may not be good enough. A large down payment and excellent credit may the final standard if you want to purchase a home in the future. All the more reason to do everything possible to improve and restore your credit and credit scores now.