September 19, 2008

BIRMINGHAM, Ala. - The collapse of the country's investment banks including Lehman Brothers on Sept. 15 among other market factors has meant quickly tightening credit and fewer loan opportunities for the country's potential home and car buyers as well as anyone else seeking borrowed cash for purchases.  UAB Assistant Professor of Finance Stephanie Rauterkus said Friday that current lending conditions make a person's credit score more important than it has been in recent years as one looks to secure a loan.  She offered a series of tips Friday to consumers looking to improve their credit scores in an effort to secure future loans.

• Pay Bills On Time "You must pay your obligations on time, because your credit score is penalized each time you make a late payment," Rauterkus said.
• Keep Debts Low "A consumer needs to show him or herself as a good risk for creditors by keeping debt levels down, and having a low ratio of outstanding debt to available credit," Rauterkus said.
• Credit Should Not Be Used To Extend Your Budget "Use your credit wisely.  Don't purchase more on your credit lines than you could pay off the next month.  In other words, if you don't have the cash for it, don't buy it," Rauterkus said.
• Write Out A Monthly Budget "This is so that consumers know exactly what they're spending each month.  Write out how much you plan to spend each month and on what, and then stick to it," Rauterkus said.
• Communicate With Creditors "In this climate banks don't want customers defaulting on loans, and you'll be surprised how willing creditors are to work it out if your debts seem beyond your control," Rauterkus said.