Recs

2

Tougher Credit Days Ahead

I know the subprime-lending crisis came about from too many risky loans being made to too many risky borrowers. Even though I haven't taken out any subprime mortgages, I also know that the crisis is having a significant effect on millions of people, not to mention lots of financial companies, including big names Citigroup (NYSE: C  ) , Capital One (NYSE: COF  ) , Merrill Lynch (NYSE: MER  ) , Bear Stearns (NYSE: BSC  ) , and Lehman Brothers (NYSE: LEH  ) .

But I didn't fully realize how the crisis may have some meaningful ramifications for me -- and probably you. I gained a new perspective after reading a somewhat scary viewpoint on the recent subprime-lending crisis the other day, from Bill Hardekopf of lowcards.com.

Here are some points to ponder:

  • It may get harder to borrow money from your bank, whether for a car loan, home-equity loan, mortgage, or any other reason. Banks are likely to be fussier than before. If you just don't cut it with regular banks that charge reasonable rates, you might end up looking at other lenders offering less reasonable rates.
  • This might actually be a good thing: Hardekopf suspects that even new credit cards will be harder for some people to get. Apparently, in the United Kingdom, "half of all shoppers seeking new credit cards are being turned down. Those who are receiving offers are paying higher rates and fees."
  • It's going to be more important than ever to keep your credit record clean and your credit score high. Happily ensconced in your home, with no plans to refinance your mortgage in the immediate future, you might think you're out of the woods. But no, these days, our credit scores get looked over by all kinds of lenders, as well as potential employers and landlords, among others. It's an important influence on your financial life. If your score drops, your credit card rates, for example, might get raised. Lower scores mean higher mortgage rates, too. According to a recent issue of Money magazine, a FICO score of 760 would qualify you for a mortgage at an interest rate that's 4% less than someone with a 560 score.

Learn more
Be a smart credit user. Learn much more about credit by visiting our Credit Center, and check out the following articles:

As Foolanthropy enters its second decade, join us in working to bring financial education to the world's children. Learn more about Foolanthropy's new direction.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 556642, ~/Articles/ArticleHandler.aspx, 10/24/2014 5:01:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Selena Maranjian
TMFSelena

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

Today's Market

updated Moments ago Sponsored by:
DOW 16,805.41 127.51 0.76%
S&P 500 1,964.58 13.76 0.71%
NASD 4,483.72 30.92 0.69%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
BSC.DL $0.00 Down +0.00 +0.00%
ELEMENTS Benjamin… CAPS Rating: No stars
C $51.80 Up +0.39 +0.76%
Citigroup Inc CAPS Rating: ***
COF $79.27 Up +0.88 +1.12%
Capital One Financ… CAPS Rating: ****
LEH $0.13 Down +0.00 +0.00%
Lehman Brothers Ho… CAPS Rating: *
MER.DL2 $11.64 Down +0.00 +0.00%
Merrill Lynch & Co… CAPS Rating: *

Advertisement