Credit Cards Guide

Fewer lenders granting credit, more restrictive lending terms, and higher minimum credit score requirements: sounds like a recipe for us to get out and stay out of the credit environment. The conventional wisdom seems to be that if we avoid the credit system we can’t become victimized by it. However, this kind of thinking is a big mistake, one that could make it more difficult and expensive when you do decide to leverage someone else’s money in the form of a loan someday.

There are two primarily reasons why you should continue to use credit. They are:

1. Interest rates are at historical lows – If you are in the market for a home loan, commonly referred to as a mortgage, then you’ve probably seen rates as low as 5 percent. If you are in the market for a car loan, you’ve probably seen rates as low as 0 percent, which you can’t beat until auto lenders decide to start paying us to borrow their money. These rates are as low or lower than they’ve ever been. This means if you are in a position to buy a car or a home, not only are you in a position of enjoying a fantastic buyer’s market but your funds will also be very inexpensive or free.

2. You don’t want your credit scores to disappear – For those of you who are, as I am, very sensitive about your credit scores, it would be a good idea for you to take some time to learn about FICO’s® minimum credit scoring criteria. Not all credit reports CAN be scored. They must meet minimum standards in order to qualify for a score. Those standards are as follows and apply for credit reports generated by any of the credit reporting agencies: 1) Your credit file must have at least one account that has been open for at least three months. The file must also have at least one account that has been updated in the past twelve months. One account can satisfy both requirements but collections or public records cannot. If you choose to exit the credit environment, your credit file will eventually fail this criteria.

If you’re in the market for a car or home and you have the income (capacity) to make the payment for the entire time you own the asset, now is the time to pull the trigger. If you have excellent credit, it just might be the cheapest money you’ll ever borrow.

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Tags: Credit Credit Environment