During the past few months, the credit crisis has made it tough for companies to get loans and lines of credit, but the extent to which consumers are feeling the squeeze largely depends on their credit scores.
To put it simply, if you have a superior credit score, it's likely you can easily access credit. But now you'll need a much higher credit score for the best deals, and you may find lenders getting a little stingy with how much you can borrow.
Credit scores range from 300 at the low end to a max of 850, according to Fair Isaac Corp., developer of the FICO credit scoring system.
"Last year at this time I would have said about a 700 FICO score was necessary to qualify for top-tier credit offers. Today you probably need to be in the 730 to 740 range," says Curtis Arnold, founder of Cardratings.com.
Forty percent of Americans have credit scores of 750 or higher, and another 33 percent have scores between 650 and 749, according to Fair Isaac.
If you have less-than-perfect credit, that doesn't mean the credit door will be slammed shut on you. You may have to settle for a credit card with a lower limit and a higher interest rate, or you may have to make a higher down payment for a mortgage or auto loan.
MortgagesWhile most of the news coming from the housing sector is grim these days, scattered rays of light are poking through the clouds.
In some housing markets, home prices and sales are up and mortgages are available. The catch: Buyers must have very good credit and cash reserves to ink a deal.
Sales were up 28.1 percent in California during the third quarter of 2008 compared to the previous quarter, mostly due to steep declines in the median price for existing single-family homes, according to the National Association of Realtors.
Bargain hunters and investors looking for distressed situations -- foreclosures and short sales -- are fueling sales, and most of these transactions are still financed by mortgages.
"For first mortgages, financing is, without a doubt, available," says Robert Satnick, chairman of the California Mortgage Bankers Association. "Folks with a 700 (credit score) or greater are not having any problem finding financing," he says.
You can use our mortgage rate search to find such ready and willing mortgage lenders in your area.
Buyers in the 650 to 700 credit tier will find their applications scrutinized a little more closely. Those with credit scores between 620 and 649 will find it challenging to get conventional financing, and buyers with scores under 620 may be out of luck -- in California, at least.
Even those with great credit will be expected to have a healthy amount of cash available for a down payment to qualify for a conventional mortgage, according to Satnick.
"Cash is king. So 20 (percent) to 30 percent down gets you the best financing," Satnick says.
In the Decatur, Ill., area, the median sales price of existing single-family homes rose 8.7 percent to $93,400, followed by the Bloomington-Normal, Ill., area, where the median price rose 8.1 percent to $168,400 in the third quarter of 2008 versus the same period last year, according to the NAR.