If you’ve ever wondered what the phrase credit crunch really means try applying for a loan. It means that it is very very hard to get one. At any price.
Don’t get me wrong, some people will still get credit. Indeed the numbers getting a mortgage are now rising slowly – though still half what they were a year ago. How do these class swats do it? They have a perfect credit score.
Every time you are late with your credit card or mobile phone contract payment you get a big amber stamp on your credit record saying ‘warning casual about paying on time’. And if you have three or more late you get an illuminated red sign which says ‘lend if you like but you may be taking a b i g risk’. And if you miss a payment or go overdrawn without permission – your current account is now on your credit file – you get a klaxon going off saying ‘danger danger, reject if you’ve got any sense’. And all this information hangs around for six years!
Of course, you might still get credit. But if you do, instead of an APR at 8.9% it will be more like 29.9%. The lenders call it pricing for risk. The ads tempt you in with a really low rate (and which they have to give to two out of three people). But when they see your credit record has more holes in it than an Emmental cheese they hold their nose and double, treble, or even quadruple the cost.
So always pay your credit card on time. Never miss or delay an instalment on your car loan. If you cannot guarantee to pay your monthly mobile phone bill every time then bin it and get a pay as you go. It is more expensive but it cannot damage your credit rating. And keep up your mortgage payments. If you do not you may never get another.
Some bills that do not involve credit are not on your credit record. Of course they have to be paid too. Not least because if you put them off too long you will be taken to court. And to say that is bad for your credit rating is like saying your heart stopping is bad for your health. But do make sure that the bills you always pay on the dot – or preferably a few days before the dot – are the ones that go on your credit record.