It’s the Credit Score Stupid!

Right now, the Obama administration wants to help small businesses get loans by injecting $30 billion in to community banks.  This will allow up to $300 billion in new loans to small businesses.

As reported by Bloomberg news the other day, experts have doubts about this plan: “Bankers say the problem isn’t scarce credit, it’s lack of demand from creditworthy firms in a weak economy. The result may be more loans given to distressed firms and higher losses.”

I continue to be puzzled why so many experts and those in our government do not understand that the bad economy has rapidly stressed the root of the problem, individual credit scores.  After all an individual’s credit score is the main way credit is determined for most small businesses.

This is what happened.  The bad economy stressed personal and small business finances, caused downsizing, delayed payments, defaults, etc.  It made otherwise good creditworthy people have a significant drop in their credit score.

Now however, many have recovered from their personal or small business hardships.  If not for their depressed credit score, they would be “creditworthy”.

Problem is the downward effect on credit scores can remain for up to 7 years, regardless if the financial condition has improved.

So, it really is a credit score problem, pure and simple!  Fix that and the economy can roar back to life.

What is now needed is a massive credit score restoration program.  There is not much the government can do about that, but individuals should know that there are many credit report errors that can be fixed and things like identity theft removed from their credit reports.  Creditors are more likely to grant goodwill corrections of negatively reported items to those now in good standing.  Many small debts, weighing down credit reports and credit scores, can now be paid to collection agencies for much less than face value.  All this will help improve credit scores and rapidly.

SmartCredit.com can help individuals and small business owners in this endeavor.  It allows them to take personal responsibility for their credit score and credit education.  Smart Credit has an unrestricted free trial where members can use the Jean Chatzky Score Builder app to see where they stand and what their future credit score could be if recommended Action buttons are used to work out issues directly with creditors.  Smart Credit is connected to over 36,000 creditors for fast and effective results with the simple push of a button.

It is time we all recognize that until credit scores improve for millions of individuals and small business owners, the economy and the unemployment rate will remain bad.

David B. Coulter – Founder and C.E.O. of SmartCredit.com

Categorised in: Credit Report, Credit Score, Getting Credit, Government, Improving Credit, Money & Identity

This post was written by David B. Coulter