Many people found 2009 to be a difficult year for managing credit. Difficulties were experienced in taking care of existing credit agreements, whilst it became increasingly difficult for people to gain access to new sources of credit. If 2009 was a tough year for consumers, we believe that 2010 is going to be equally as tough (if not tougher). Therefore, it’s going to be more important to unlock the full value of your credit file now than it has ever been before! Economic Conditions Affecting Credit Throughout 2009 we saw unemployment increase, businesses fail and the availability of credit become increasingly restricted. However, the negative effects on the economy were minimized due to government intervention. We saw the government bailout banks and encourage them to continue lending, we saw taxes reduced (VAT and Stamp Duty), the car scrap page scheme was introduced and we also saw the Bank of England reduce interest rates to the lowest levels seen. These interventions have bought breathing space for many individuals, thus allowing them to sort out their financial arrangements. Government Pressure on Credit Come 2010, we are going to see many of these â€Breathing Space’ elements removed. VAT and Stamp Duty will need to increase in order to deal with huge government deficits. Unemployment levels are also likely to increase further. Each of these factors create heightened levels of credit risk. With these factors in mind, lenders are likely to continue to be cautious when it comes to granting credit to individuals. One element that will continue to work in consumers’ favour is the fact that many bank are now largely in debt to, or owned by the government. This means that the government still has a strong say in the way banks operate, which can only mean that banks will continually be encourage granting credit to consumers. Affordability of Credit With default rates on loans at an extremely high rate, banks and other lenders are going to need to assess credit applications even more thoroughly than they have done ever before. The lenders goals will be to increase availability of credit to individuals, whilst reducing default rates. It is the opinion of The Credit Agency that credit grantors will increasingly look at affordability of credit in conjunction with assessment of credit files. This is likely to put an end to instant credit decisions for all but the most â€Prime’ customer segments, as additional questioning will be required to supplement the detail found on consumers credit files. Managing Your Credit File As always, our advice is to manage your credit file effectively. Check your credit report to establish whether there are any errors or omissions in order to boost your credit score. If you have any existing credit agreements, ensure that you do not miss any payments. Any black marks on your credit report now will have a greater effect than ever before. The closer you can get yourself to being in the Prime credit risk category, the better! New Customer Segments If you don’t have a perfect credit file, then all is not lost. Lenders are going to be looking hard to find new customer segments to lend to. They will be looking for a â€New sort of Prime Customer’. The customers they seek will be ones that can prove affordability of credit who don’t have a perfect credit file. Such customer segments could include individuals that haven’t taken out much in terms of credit or have even had the odd default in the past. The way to demonstrate affordability of credit is to show that you can pay all of your outgoings on time, that you have cash left over and that you are in secure employment. If you can get yourself into this position, then you will be putting yourself in a good position for 2010. The Way Forward Take steps now to clean up your credit files with Equifax, Experian and Call credit. Then look to put yourself in a financially positive position so that you can demonstrate affordability of credit. Log on http://www.thecreditagency.co.uk/equifax/equifax-free-credit-report.html to read in more depth!!
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