Quality, not Quantity

Implications: Borrowers are finding it more difficult to obtain credit because lenders have a renewed awareness of the basics of extending credit, not because borrowers are requesting credit more often.

Analysis: Borrowers are finding it more difficult to obtain credit because lenders have a renewed awareness of the basics of extending credit, not because borrowers are requesting credit more often.  In the heady days of the record-setting low interest rates of 2003, 2004 and 2005, lenders were seduced by borrowers' demand for credit to the point they comprised their credit standards beyond reason.  This steamrolled in 2006 and 2007 when lenders could no longer sustain their operations, the proverbial "church built for Easter Sunday."

The most valuable piece of advice in this article is "Checking your credit record to make sure you don't have any errors, or disposing with the half-dozen credit cards lying unused in the bottom drawer could also make the difference between a yes and being declined..."  Taking an active role in managing your credit score is the best thing any borrower can do.  Further, "What happens is they are rejected and can't believe it so apply again and again, but have no idea how damaging repeated applications are for their credit records in the short term," he said. Historically it was the number of searches that was most damaging to a credit file, he added, but the higher frequency of searches from firms like mobile phone companies means the key issue now is how recent the latest search was and not the number of searches. "It's just not a good idea to take a scattergun approach to credit applications,"...  This is all good advice.

However, the following remarks can lead to peril, "Mark Maguire, spokesman for GE Money Home Lending, said multiple failed applications can be time consuming and detrimental to a borrower. "As lenders continue to amend the profile of the borrowers they seek to attract by changing their acceptance criteria, it is a good idea to seek help from a broker," he said."  Borrowers must understand that brokers do not work for them.  They are compensated by the lender.  This is not sinister, it simply a fact.  Borrowers must be vigilant and ask probing questions at every turn.