We hear daily on media channels this statement: "Consumer credit is limited, mortgage money has dried up and student loans are more difficult to find". A small percentage of borrowers have been impacted by these tightening restrictions. My example of the person who has been impacted negatively is: Joe the Pizza Parlor owner. Joe has a good business, lives in a nice house and has a good credit score. Joe's problem is that he shows on his tax returns zero income. He writes everything off. His accountant has been doing this for a number of years. As a result, Joe looks like he makes no money each year. We all know Joe makes good money, he pays his bills, drives nice cars, takes vacations. When he applies for a loan to buy a home the lender needs to see his tax returns and they show no income. In today's lending world banks want to see two critical things: number one, good credit and number two, income.
Joe will now have to declare income on his tax returns if he will be looking to acquire credit for homes, cars ect.... Accountants will be advising Joe to show income. As a result, the federal government will collect more taxes and help pay down the deficit.
The "Joe's" are having a hard time getting loans. Fact!
Everyone else having a hard time getting loans. Fiction!
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