Is it Harder to Build Credit Today Than it was 50 Years Ago?

rebuilding credit

In the year 1967, the median price for a brand new home was $22,000. Today, it’s almost ten times higher, at $203,400. The median price of cars has also jumped from under $3,000 to over $30,000. The median income, however, hasn’t risen quite as much. In 1967, it was $7,200. Today, it’s $59,000. It’s no wonder that it has become almost impossible to invest in homes, cars, or even education without a loan.

Prices aren’t the only things that have changed since 50 years ago. The very concept of the word “credit” has taken on an entirely new meaning. It used to refer to how reliable a person you were when it came to keeping your word. Now it refers mostly to numbers on a screen.

In 1967, if you needed a loan, there were no official credit inquiries. In fact, in 1967, the concept of a credit card wasn’t even 20 years old. (The first credit card company, Diner’s Club, was created in 1950.) So here’s the question: is it harder to build credit today than it was 50 years ago?

Here are some way in which credit has changed, how it has gotten easier to use, and how to make it work in your favor.

Applying for a Loan

The way people apply for loans, and how they qualify for them has changed since the Sixties. When you apply for a loan today, the process is usually the same no matter which type: you provide a certain amount of information, and the financial institution through which you’re applying pretty much does the rest (though they will often ask for more information at some point during the vetting process). You’re often required to provide proof of income, and then begins the process of someone combing through the last seven years of your credit history.

Back in 1967, it was more common to offer up an asset as collateral than it is today. A person needing a new refrigerator might have had to put their car up for collateral, which can still be an option, depending on the financial institution you’re trying to borrow from. Today, the chances are lower of having to offer collateral, since borrowers today can show better, more concrete evidence of good financial standing and history. Loans are also processed much faster than they were 50 years ago. In some cases, loan applicants can find out immediately if they qualify for a loan, and for how much.

Collateral still comes into play, however, in the forms of mortgages and car loans. The agreement with these types of loans is that, in the event of insolvency, the borrower must then forfeit his or her claim to the property they purchased with the loan. Homes go into foreclosure and vehicles are repossessed. Keep your accounts in good standing, and you’ll get to keep your property.

Credit Scores

Credit scores didn’t come into existence until the 1970s. When banks checked a person’s “credit” in 1967, it usually took a few phone calls to utility companies or other types of service providers. Your “credit” was based solely on your reputation. If your financial reputation was good, chances were, you would be approved for the loan you wished to take out. However, on the flip side of this, there was a chance that anyone with a personal vendetta against you, for any reason, could lie and say no, you didn’t pay your water bill on time very often. Although this was the exception, instead of the rule, the current system is actually favorable for consumers in many ways.

While this scenario was probably rare, it’s one reason that a standardized credit reporting system works in your favor today. If you’ve worked hard to raise your credit score, and you’ve paid down a significant amount of debt (or never accrued much to begin with), then no one can dispute your credit-worthiness, or try to take it away from you. Just make sure to keep your credit protected by monitoring your credit to ensure your identity hasn’t been stolen.

Credit History

Applying for a loan in 1967 was much different than it is today. Without a database of a loan applicant’s credit history, or even a computer, banks and other types of creditors were forced to do a lot of leg work to find out about a person’s ability or willingness to take out loans. This meant having the applicant list all current debts owed and then calling each place to find out about the applicant’s payment history.

Today, all a potential lender has to do is type your information into a database, and they can find out all they need to about your payment history. Ever defaulted on a loan? It’s in there now. Fifty years ago, an applicant might have succeeded without revealing that information. Now, that just isn’t possible, which works in the favor of lenders.

However, it can also help you as long as your credit looks good on paper. For those who have put a lot of effort into making sure they remain in good financial standing, this is a positive change.

The concept of credit has moved further away from being reputation-based. Today, the results of a credit check are about as accurate as they have ever been. However, identities are more vulnerable to theft, and those with less-than-perfect credit find themselves having a harder time being approved for various types of loans. Credit repair companies can often help with this, and can help you get back on track financially.

It’s much faster and more efficient for banks to check on credit today, but it’s more difficult to hide past credit infractions, no matter how minor. The easy solution is to keep your credit in good standing. However, if you’re having trouble with credit repairs, Lexington Law can help.

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