Credit Damage Blog

Credit damage is the impairment of the ability to use credit as the result of the wrongful act of another. Credit damages can consist of different elements.

Those damages can be for (a) loss of credit capacity, (b) loss of credit expectancy, (c) cancellation of credit, and (d) increased cost of borrowing. In most cases one or two of the different types of credit damage will be involved. This entry will focus on loss of credit capacity.

Loss of credit capacity, refers to the decrease of available credit and/or an increase in the interest rate for available credit, thus an increase in the cost of credit

As a result of those increased costs debt service becomes more expensive. When debt service becomes more expensive, loss of credit capacity is suffered as the injured person loses the ability to continue to use credit in the way it could be used before the damage to credit occurred.

Three examples illustrate how credit capacity may be damaged.

The first example is the ubiquitous credit card limit. In this example the injured person had a credit card limit of $100,000. After the injury occurred, the credit limit was lowered to $20,000. Thus, the credit capacity of the injured person decreased by $80,000.

The second example involves the ability to borrow against the value of real property. In this example prior to injury the injured person could borrow up to 90% of the value of property. After the injury occurred, the amount available was reduced to 70% of the value. Thus, the amount of money which could be borrowed was reduced. Additionally, when credit is damaged, the interest rate increases as well, so not only was the amount of credit available reduced, but the cost of borrowing that amount increased, making it more expensive to borrow against the value of the real property. Thus, credit capacity was decreased by the 20% reduction plus the increased cost of borrowing.

The third example involves the purchase of a motor vehicle. In this example prior to injury a person with excellent credit can walk away with a new car paying nothing down. After injury and damage to credit, the same person might have to make a down payment of 15 or 20% of the value of the car and be subject to a higher interest rate on the balance due. Thus the amount of credit available decreases and the cost to manage the debt increases, a loss of credit capacity.

Additionally, in the unlikely event that new credit can be obtained after credit damage occurs, the amount will certainly be less than would have been the case before credit was damaged. On top of that, higher interest rates and monthly payments will be required. In other words credit won’t be as affordable as it was before the injury, a significant loss of credit capacity. All of the above examples reflect a loss of credit capacity. The amount of credit available will have decreased as a result of the damage to credit. The cost of that credit will have increased, making available credit more expensive as a result of the damage to credit.

Compensation for loss of credit capacity is available and should be sought in any case when the damage to credit is caused by the wrongful act of another. To obtain that compensation requires that a qualified expert be retained. The pioneer and leading expert in the field of compensation for credit damage is Georg Finder. To learn more about what Georg Finder can do to strengthen your case, see http://www.creditdamage.com.