The importance of knowing what is a good credit score has become a much more visible topic of discussion since the subprime mortgage mess started this summer. As background information, subprime loans are the loans given to borrowers who credit bureaus consider to have relatively poor credit histories.
However, most mortgages were only offered to fully qualified, “prime” borrowers who could afford to re-pay them normally. It is astonishing that such a tiny section of the huge $10 trillion dollar American home loan market could cause such a worldwide impact. But even more astonishing is the pain this backlash caused ordinary people and the 10 percent slide in the U.S. stock market that resulted.
The money available to people with poor financial histories has dried up as a result of many subprime lenders being forced to go out of business. A number of people who were planning large purchases therefore went to check their credit scores to see if they could still qualify for a loan. Due to the subprime mess, many of these people were disappointed to find out that they had suddenly become ineligible.
In light of the subprime loan debacle, people are starting to realize the importance of their financial histories. With a good financial report being more necessary for a loan, credit bureaus are being flooded with not only request for copies, but also help on how to improve less than perfect reports. Therefore, credit bureaus are making the reports more accessible.
The crisis in subprime lending means, unfortunately, that more and more people are in default on their mortgages and stand to lose their homes. It is good that the rental market is there for these people; in most places in the United States, there are lots of properties even someone who has defaulted on a mortgage can afford. Still, for those who are in need of a loan, that process will doubtless be more difficult across the board.
Even though the current loan difficulties are making it hard for people to receive money for mortgages and other big loans, many experts believe the Federal Reserve will make cuts to its interest rates, making it easier for lenders and loan applicants to move the money necessary to keep the market afloat. This will make receiving and paying off loans possible again, and prevent a total bust on the economy.
- Daniel Lesser
Tags: Mortgage Articles
