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Most of you would have heard about the “credit crunch” in the media recently, but what exactly is this and how will this affect you, I hear you say…….?
Well, in a credit crunch, lenders slow lending and credit becomes really hard to obtain, therefore in the future, most of us will find that lenders are less willing to offer us credit and many people will have no idea why they are being refused for credit.
In a nut shell, it all comes down to the fact that it's costing lenders more to borrow the money resulting in a lack of easy money. This means that the credit that you are used to getting at the drop of a hat isn't there anymore and more of us will have our applications declined.
During Autumn/Winter 2007, up to 3.27million people have seen applications for credit cards turned down, an increase of 17 per cent.
We also saw no less than 125 fee and rate increases and cash withdrawal fees were upped on 69 cards. This happened in the past and this behaviour from the card companies is likely to happen again in the future.
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This situation all started when people with poor credit histories or people with low incomes in America weren’t able to make mortgage repayments because of the rise in interest rates, which eventually resulted in many homes being repossessed.
The old saying, that "when the US sneezes, the rest of the world catches a cold", applies more than ever these days.
Our top tip would be to stop blasting your cash and get saving for a rainy day. You never know when you might need something to fall back on.
When the big banks and lenders place greater restrictions on granting credit, consumer confidence and spending falls, which in the past has slowed down the whole economy and can lead to recession.
The best thing you can do to understand your own situation is to get a copy of your credit report
The easiest way you can get a free Experian credit report online is to sign up for a free 30-day trial with Credit Expert.
Remember that Credit Expert membership costs you absolutely nothing for the first 30 days whether you decide to remain a member or not.
Click here to see your FREE credit report
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