While I was approved for a new credit card this week, I have pristine credit. Most credit card companies, including Schwab, are looking for excuses to turn people down. Credit used to be easy to get. Anyone with a credit history that was not too bad could get a credit card.
Millions of people are being turned down for credit. I was given a lower limit than ever before on my card, and I have never had a late payment or missed payment. Credit companies are looking for the smallest problems on credit histories. A 30 day late payment used to be looked over without a thought. Now it is a reason to turn down unsecured credit.
It is important to note the difference between secured and unsecured credit when looking at this issue. Unsecured credit includes credit cards and “personal loans.” If you stop paying these, the bank has no recourse to collect the money outside of damaging your credit report. Secured loans, such as car loans and mortgages, give the bank the option of taking the property. That gives the bank the opportunity to recoup their costs in the event someone stops paying.
What can you do to avoid the shared fate of millions of applicants? Keep paying your credit card and loans on time. If you are 18 and have never had a credit card, it is time to get a student card, but use it responsibly, to establish credit. If you have negative information on your credit report that is inaccurate, dispute it. If you really did screw up, pay off that card and close it. Credit history is only good if you have a good one.
This issue is also impacting current credit holders. Banks are looking for ways to make more money and cut losses sustained from bad loans. As a result, people are getting credit lines slashed and seeing fees and rates increase. If you are a regular reader, you saw that I was given a new $30 annual fee on my Chase card (which led to me closing the account).
If you are denied, don’t be discouraged. The credit crunch is not over and people around the world are suffering as a result. Just do the right thing with your current credit and things will slowly start to turn around.
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