Stricter Loan Requirements this 2009

Credit. The country’s widespread use of it has led to major economic problems today. Several generations of Americans lived beyond what they can afford, creating more home owners, car owners, and college graduates than ever before. While using credit is not at all bad in moderation, it can create a lot of problems if borrowers cannot pay off their loans. If they are unable to do so, they do not only pay higher interest rates, they also risk foreclosure and seizures.

Despite the drawbacks of using credit, using it has become commonplace ever since the 1920s. Right now, it is estimated that 40% of all U.S. households now carry a credit card balance every month as opposed to just 6% in 1970. Aside from credit card, student loans also seemed to have become a problem. Around two-thirds of college graduates today carry a student debt load as opposed to 50% about a decade ago.

But because of the financial meltdown, lenders are becoming stricter about their requirements. For 2009, they are enforcing strict loan approval that requires borrowers to have low debt ratios and high credit scores. Below are just some of the things you can expect if you want to apply for a loan:

Mortgage – in order to get the best rates, lenders require you to have a minimum credit score of 740. It is still possible to get a mortgage with a lower credit rating but you’ll be charged higher interest. In addition, lenders also look into the debt ratio.

Home Equity Loans – to get approval for home equity loans, it is important for you to have a credit score of between 650 and 680 to get the best rates. Some lenders even make a credit score of 720 their minimum requirement.

Car Loans – if you intend to buy or lease a car this year, a credit score of 700+ is needed to do the trick. Of course, getting a loan with a lower score is also possible but you might need to deal with a slightly higher interest rate depending on your credit standing.

Credit Cards – because of the financial crisis, credit card issuers have raised their standard for good credit this year. And even if you do get a credit card approved, it will be a good idea to keep your balance under 30% of the credit limit.

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