Credit Crunch? What Credit Crunch? Where?

Whether it’s in the U.S. or here in Canada, I keep hearing about that “credit crunch.”

I understand it, but I can’t personally find it, and you won’t, either. Not as an individual who has decent credit, with a credit score above 700 and the income to justify making the payment.

In fact, all the talk in the U.S. recently was that the lowering of interest rates to near zero was fueling a huge boom in re-mortgaging. Well, those two stories of a credit crunch and all that refinancing don’t jive. And if I had the resources, I’d gladly put up a reward for anyone who can document being turned down because of a credit crunch. It won’t happen.
Find me a lender who’s got the sign out: Not lending today.

I tried to find it myself. I applied for three car loans and three lines of credit. No, I wasn’t getting them – neither you, nor me need more debt. But I was approved every single time! I’m pretty typical middle class and have a credit score over 720. All the approvals were a no-brainer and took less than five minutes each time.

Challenges for business credit issues are different and do exist. But you and I don’t borrow 50 million or a half a billion dollars. It’s why the government is getting the Export Development, Farm Credit and Business Development corporations involved, and helping them.

Lots of debt also gets sold as asset backed securities. That’s the balloon that blew up in the US housing market. It’s about a $50 billion market in Canada and that’s definitely slowed down. No investors really want to own pieces of these securities right now.

As a result, lenders have to keep their loans or credit card balances on their own books, instead of re-selling them. That is the reason rates haven’t moved down much for fixed mortgages and why credit cards are actually going up. It’s an issue of supply and demand.

If we call it business credit crunch, I’m OK with that. But for you and me – for us individuals, there’s isn’t a crunch, shortfall or lack of money. There’s just a new reality that we need good credit and the money to pay the payment. If lending based on good credit and income hadn’t been temporarily abandoned for a few years we wouldn’t have 90% of the mess we do now!

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