Even if you are not a home owner and are not planning to purchase a home any time soon, you might still feel the pinch from the country’s rising mortgage crunch. As a result of the increasing number of mortgage defaults throughout the country, many lenders are increasing their rates for other types of loans as well. This includes auto loans, personal loans, and credit cards as well.
Since credit card rates are ultimately set by the Federal Reserve, the base rates haven’t actually gone up. But, since credit card companies can increase your rates if you fall into a higher risk category, taking a closer look at your credit history may provide them with an opportunity to increase your rates. Increasing the interest rates of those with poor credit has long been the practice of the industry, but the mortgage fall out has caused the companies to take a closer look at their customers to see where more pennies can possibly be pinched.
For those that have maintained a good credit history, you probably won’t notice a difference in your rates. If you have a blotchy credit history, however, you might find yourself being moved into a category that brings about more expensive rates.
The mortgage crunch is also leading to more credit card usage as homeowners find it increasingly difficult to get approved for home equity loans and other forms of credit. Many credit card owners are also finding that their credit cards offer better interest rates than those provided by a home equity loan or they prefer using a credit card because it does not require putting their home up as collateral.
I personally have a home equity line of credit that I opened several years ago that I do not use because I have found that I can actually save more money on interest with my credit cards and I prefer keeping my home off of the chopping block when spending. Although I have great credit and have no intention of defaulting on my loan, I take comfort in knowing that my house isn’t at risk if something should happen and cause me to be unable to repay my credit card.
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