Finance Matters

Posts Tagged ‘Credit Crunch’

Bankruptcy can negatively impact every aspect of your life, but it has a particularly terrible effect on your credit score.

A declaration of bankruptcy can sink your credit rating by as much as 220 points for seven years or more.

That’s enough to take a “good” score down to “poor,” which means that you won’t be able to enjoy your low interest rates, cash back rewards and high spending limits for a long, long time.

However, filing for a Chapter 13 or Chapter 7 bankruptcy doesn’t mean that you should stop using credit altogether. The best way to get lenders to trust you again is to show them that you’re actively rebuilding your credit score through regular spending and repayment. So where do you find a credit card that you actually qualify for?

Well, in light of the 2008 credit crunch, many credit card issuers have started offering cards designed specifically for consumers who’ve experienced a bankruptcy. These cards feature limits that increase over time as well as additional monitoring services that are designed to help you get your credit score back on track.

Here’s a look at some of the best ones currently on the market.

The Orchard Bank Classic MasterCard. Don’t let the palm tree, butterfly or dolphins on the card face fool you – the Orchard Bank Classic MasterCard is a very aggressive spending tool. To help you spend more often and more intelligently, the card allows you to choose your own repayment date, and you’ll receive email and text message reminders as that date approaches. It also features other benefits, like a 24/7 help line, emergency card replacement and zero-liability fraud protection to keep you secure while you rebuild your score.

The AccountNow Prepaid Visa Card. The AccountNow Prepaid Visa is one of those rare prepaid debit cards that actually reports your spending history to a credit monitoring bureau. You can load it up with as much as $5,000 a day (for no charge), and you can even write online checks with it for free. Since the card doesn’t carry a balance, it’s good choice for consumers who are worried about falling back into debt.

The CreditOne Platinum Visa. Watch out! Someone just got their Platinum Card back! Well, sort of. If you’re concerned about those snobs at the country club finding out that you lost it all, you can keep up the appearance of “platinum status” while rebuilding your credit score with the CreditOne Platinum Visa.

For $75 a year, the card will report all of your monthly purchases to the major credit monitoring bureaus, but that’s not all. You’ll also get travel accident insurance, and your spending limit will increase automatically over time. Break out the Grey Poupon, because somebody’s living the high life again.

No matter how you slice it, bankruptcy credit cards aren’t ideal pieces of plastic. They have low limits.

They make you cough up a security deposit to use them. They come with annual fees. But in a market full of rip-off products for “bad credit” consumers, at least these credit cards are honest. They’ll report all your purchases to the major credit monitoring agencies and your spending limit will increase as you continue to prove your trustworthiness. And after a year or so, you might even be eligible for an upgrade.

Don’t miss: The best rewards cards for saving cash at the pump > 

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The average age of a first time buyer in the UK has increased to 30 according to research by Clydesdale and Yorkshire Banks.

In the face of large mortgage deposits, a shortage of affordable housing and pressure on personal incomes, many potential house buyers have to wait longer before they can afford to take their first step on the property ladder.

However the situation varies across the UK, with Yorkshire having the youngest first-time buyers, with an average age of 28, while the average age in Wales has now reached 36.

The high cost of properties in south east England means that the typical first time buyer is 34 when they buy their first home.

There is a similar picture in London, where the typical first time buyer is 33.

People living in Scotland and the south west of England are likely to buy their first house at the national average of 30.

Last year, industry experts warned that the average age of a first-time buyer could reach 40 by the end of the decade unless the number of new homes built reaches 300,000 annually.

The shortage of affordable housing has led to the launch of the Government-backed FirstBuy scheme, which is designed to make home ownership more affordable by providing low deposit mortgages.

Since the credit crunch lender are demanding deposits of up to 20 per cent on home loans, putting them out of reach of many prospective house purchasers.

Through FirstBuy, the government and housebuilders together will offer first-time buyers a 20 per cent equity loan.

The buyer must find a five per cent deposit, enabling them to take out a 75 per cent mortgage on the rest of the property.

One hundred housebuilders are making their new-build homes available under the scheme, which is expected to help over 10,000 first-time buyers in England over a two-year period.

Is the euro crisis over?

George Soros doesn’t think so.  From his new op-ed piece for the Financial Times:

Far from abating, the euro crisis has recently taken a turn for the worse. The European Central Bank relieved an incipient credit crunch through its longer-term refinancing operations. The resulting rally in financial markets hid an underlying deterioration; but that is unlikely to last much longer.

The fundamental problems have not been resolved; indeed, the gap between creditor and debtor countries continues to widen. The crisis has entered what may be a less volatile but more lethal phase.

Soros argues that “at the onset of the crisis, the eurozone’s break-up was inconceivable” because all of the countries finances were so deeply intermingled. 

But thanks to the LTRO and the countries distaste for international bonds, Soros think that within “a few more years, a eurozone break-up would become possible without a meltdown – but would leave creditor countries’ central banks holding big claims that would be hard to enforce against debtor countries’ central banks.”

Read Soros’ entire piece at FT.com.

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See Also:

• EUROPE IS BACK: Spanish And Italian Markets Are Getting Smashed, And Yields Are Spiking
• 10 Horrible Facts About Spain
• WOW: It’s A Landmark Day For European Sovereign Bonds

The UK government is negotiating with Abu Dhabi sovereign wealth funds over the sale of a stake in Royal Bank of Scotland (RBS), the BBC reported yesterday.

It is believed that Abu Dhabi, which is part of the oil-rich United Arab Emirates, could buy up to a third of the government’s 82% stake in the UK bank.

With RBS shares trading at a substantially lower price than the government acquired them for in 2008, the deal is likely to mean a substantial loss for the UK taxpayer.

The UK government bought the shares for £45.5bn in 2008-9 in order to bail out RBS following its ill-advised takeover of ABN Amro prior to the credit crunch.

Although selling the shares to Abu Dhabi would be loss-making, the sale could generate further interest from the private sector in the bank and this could see its share price increasing to a break-even position.

The UK government’s stake in RBS is held by UK Financial Investments, a company set up in November 2008 to manage its shareholding in rescued banks.

Speaking to the BBC the Treasury said: “The government’s policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.”

In other banking news, US company GE has revealed plans to open its first British bank – GE Capital Direct.

The internet bank would try to attract billions of pounds of savings in its first year of trading.

The Financial Services Authority has approved GE Capital Direct’s banking licence and it can start offering a full range of banking services.

Its launch is part of GE’s global plan to diversify forms of finance following the credit crisis.

The company which is the world’s largest conglomerate and has an AA+ credit rating, recently opened GE Direkt in Germany.

The government launched its NewBuy scheme today, to help people afford a mortgage on a new property.

The mortgage indemnity scheme will help people borrow up to 95 per cent of the value of new homes, for example on a newly built £200,000 property they would have to provide a £10,000 deposit.

Since the credit crunch many potential house purchasers have struggled to afford a mortgage, with lenders demanding minimum deposits of between 5 to 10 per cent, while the best deals have gone to borrowers with deposits as high as 40 per cent of the value of the property.

The average age of first-time buyers has risen substantially since the credit crunch, and many people have turned to the rental market as they are unable to afford a deposit on a mortgage.

The NewBuy scheme is designed to give lenders the confidence to offer mortgages requiring deposits of just 5 per cent.

House builders who have chosen to participate in the scheme, will pay 3.5 per cent of a property’s sale price into a special account held by the lending bank for seven years.

The government will pay-in an additional 5.5 per cent of the sale price, providing a further guarantee, which can be accessed in the event of a major crash in the property market.

Commenting on the NewBuy scheme, Housing Minister Grant Shapps said: ‘I’m not prepared to stand by, and nor is the government, to watch an entire generation of people be locked out of the housing market when they can afford proper mortgages’.

The scheme is expected to boost the property market and lead to an extra 100,000 properties being built, creating around 500,000 jobs.

However, Labour shadow housing minister, Jack Dromey, today questioned why the number of mortgage lenders and house builders participating in the scheme has fallen from when it was first announced.

Just three mortgage lenders are now involved, compared with an expected seven, and the number of participating builders has dropped from 25 to seven,

Simon Walker, Director General of the Institute of Directors, said that the best way to help house-builders and people wanting to buy their own home is to introduce planning reforms to allow more houses to be built.

“Real planning reform would kick-start the construction industry and make prices more affordable for young couples looking to own their first home,” he said.