Where Do the Credit turn-Downs Go?
So we have experienced the largest recession since the great depression. The economy must bounce back right? Well, let's see what is holding us back. Much is said today about the unemployed, the credit card crisis, the sagging housing market with millions of homes in pre-foreclosure, the automotive industry and the lenders that are reluctant to lend, but what about the client who has the income, job stability and desire to buy?
Well if they lack a minimum Credit Score that is acceptable to a lender, they are out of luck. With many lenders in the housing and automotive market mandating credit or lending overlays, the Credit Score requirements keep inching up and guidelines are tightening. So for example, if a potential homeowner lacks 25 points on a Credit Score to qualify, how do they get the correct and real-time information on how to correct that score or credit file? Potential buyers today may not realize that the lending process is a pass or fail environment and they need to have clear direction including an action plan to resolve credit issues or concerns.
With all the recent events, the current Credit Score system may have a very hard time calculating true risk as today's credit challenged may have been yesterday's successful middle class with an outstanding credit file. The issue is the rehabilitation of credit and how people will borrow, a necessary function of moving the country forward as we are a consumer based economy. In our business, we see clients who try and shop their way into an approval or they never understood how the credit system works until we educated them on the basics. Unfortunately, sub-prime loans have allowed us to take our eyes off the credit education and the disciplines of having good credit went out the window with the economy. Either way Credit Scores or the function of them is not going away anytime soon.
Credit is like any other issue in our life. It must be approached and dealt with through education, action and persistence. There is no magic wand but it is a process well deserved of time and effort and we must realize that today's "turn downs" are tomorrow's buyers. Our credit system today will have a very hard time profiling the clients as our environment has changed so much and is no longer a reflection of a person's character or behavior. So with that I will say "Let's not focus on THE economy, but rather on OUR economy" and credit recovery is a huge step in the right direction.
Harry Snedden- ScoreCrafters LLC