[Published in January 2010] Remember the incessant commercials on radio and TV about fixing bad credit and improving credit scores? They have vanished, to the regret of no one. Lenders are more cautious now, preferring substantial down payments and other evidence of ability to pay over high credit scores.
The problem with credit scores is that they measure the borrower’s behavior in the past. After the financial upheaval of the last year and a half the past performance of borrowers, like mutual funds, may not predict future results. Lenders are now asking “What can you do for me lately?”
Home mortgage rates are low, but a high credit (or FICO) score does not make approval of a loan a cinch. It is not clear that home prices have stabilized, so lenders are seeking buyers who show their commitment to staying with the loan even if home prices drop some more. That means lenders like a substantial down payment.
Manufacturers are offering some low rates on car loans these days, but look at the terms. Most low or zero percent car loans last no more than three years. To keep monthly payments at a digestible level, the buyer often needs to add a cash down payment to the equation.
Even the credit card companies have shown little respect to the FICO score elite in recent months. FICO leaders’ credit lines were cut along with those of everyone else. And the banks have TARP money to pay back, so there will be few breaks on interest charges.
Financial trouble eventually brings people back to basics concerning money. A high credit score is nice to have, and probably reflects good monetary habits, but it is not a real asset compared to cash in the bank.

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