How to ride out the credit crunch

After a decade of optimism and growth, 2008 is already striking an unaccustomed note of economic uncertainty. The housing market is slowing, utility bills are soaring and, after a period of freeflow credit, lenders are becoming increasingly cautious. As a result, getting through the credit crunch is high on almost every list of many homes and families. Many of us give up after drawing up an ideal budget that we can’t stick to, so here are some realistic ways to create your own survival guide. Check your credit report Your credit history is key to keeping your finances in check. When lenders are reluctant to take risks, it’s crucial to be able to show that you aren’t already drowning in debt and that you make your repayments on time and in full. Start by checking your credit report to be sure that it is up to date and accurately reflects your circumstances. It lists your credit accounts, such as cards, loans, mortgages and even mobile phone contracts, along with your payment track record and other relevant information, such as whether you have any court judgments against you for non-payment of debts. Lenders look at it when they decide whether to make you an offer. Even a minor error could make the difference between getting that crucial loan and being turned down, so go through it carefully. Contact the relevant lenders to correct any mistakes or misunderstandings as soon as possible – be prepared to provide proof and explanations, if necessary. You can see your Experian credit report for free with a 30-day trial of CreditExpert, the online credit monitoring and identity fraud protection service. Don’t bank on interest rate cuts The January 0.25 per cent cut in the base rate was good news – and experts are predicting further cuts in 2008. Unfortunately, the amount that banks pay each other to borrow the cash they then lend to us is unusually high, so a number of lenders aren’t passing the reduction on – at least, not in full. In some cases, interest rates are on the rise, especially when the borrower is seen as high risk. The message is clear: don’t bank on interest rate cuts to save you lots of money, especially if you have a checkered credit history. Shopping around can still repay you handsomely but you may need an excellent credit rating to be offered the best deals. See your free Experian credit report now – and set your finances in order for 2008.

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07-07-2011