With the credit squeeze already here, getting financing with bad credit is almost impossible. Lenders look with ever increasing suspicion on low-doc applications, where borrowers suddenly "discover" large incomes, that they failed to declare previously.
It seems, that only a long history of employment and verifiable income, together with an absence of bad credit history, can get your credit application approved.
All major banks, from BofA to Citigroup, started using lending criteria that are so much more stringent than even a few months ago.
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Getting Financing with Bad Credit is Getting Very Difficult!
Feds Tighten Subprime Lending Rules!
According to recent reports, the US Federal Reserve is tightening lending rules for sub-prime applicants. This will no doubts reduce the number of unserviceable loans, bankruptcies and bad credit cases.
Bernanke says that Feds want the borrowers to act more responsibly, by better evaluating their financial position, and fiscal responsibilities. What's the penalty? First of all, "higher-priced mortgage loans" category has been devised, that will carry an extra 3% loading on interest rate.
Feds also want to restrict the availability of "stated income loans" where borrower's income is declared, rather than documented. Many bad credit cases originates from this group.
Let's hope, the mortgage loans, particularly in the sub-prime sector will be managed now more responsibly; not only by the public, but by the banks and financial institutions greedy to earn a profit and any cost.
Bad Credit Financing is the Thing of the Past!
What chances anybody with a bad credit status has, to get a loan during the credit crunch?
Very limited, almost none. As you may have heard, the credit crunch is the result of banks and lenders suddenly tightening their lending practices. Put simply, you need to be a low risk borrower, to get your loan application approved. Why? because the same banks have lost lots of money lending to entities with very low credit worthiness, and got burned badly.... losing millions along the way.
Finally, the Reserve Bank has put a hold to those practices, and all financial institutions have to follow. If not, their own borrowing will be severely reduced.
What does it mean for you? Each case of credit application will now be scrupulously reviewed, and the true financial position of the borrower, will be assesed. Bad credit history will eliminate most of the applicants, unless they're able to offer really high security level, as a collateral.
