Credit in the Naughties

Credit in the Naughties

Over the last decade, the economy, credit, and personal finance have been at the forefront. Unfortunately, this increased focus was due to the multitude of problems that have arisen in these fields.  2010 marks the end of an era termed “the naughties” and the beginning of a new decade.  The boom and bust of the naughties was fueled by what many feel was an era of greed and speculation. Will the economy in this new decade improve and will we see new ways of dealing with the current major economic issues?

Here are 10 of the biggest credit issues of the last 10 years.

1. In any given year, roughly 43 percent of Americans spend more money than they earn. This is a big problem that appears to be subsiding thanks to an increasing savings rate.
2. The average family carries more than $8k in credit card debt. This problem is not going to disappear until point number one, spending more than we earn subsides. The easiest way to spend more than you earn is by using a credit card.
3. In October 2003 it was estimated that Americans owed more than $1.9773 trillion. This total does not include mortgage debt.
4. Personal bankruptcies doubled between the years 2000 and 2009. Though this is one of the most common ways of escaping debt and dealing with advanced credit problems, it is not one of the best ways of doing so.
5. New laws were put in place to protect consumers. Credit Card companies have been restricted in the following activities: increasing interest rates with little notice, decreasing spending limits, and credit card cancellation.
6. New laws were also put into effect to protect credit card companies: Consumers who declare bankruptcy will now find it harder to escape from their credit card debt. Credit Card companies are being urged to take more precautions in who they lend money to.
7. The sub prime mortgage crisis began in June 2007 fueled by a decade-long housing boom. Mortgage brokers seeking big commissions talked buyers with poor credit into accepting housing mortgages with little or no down payment Due to a bad economy house foreclosures rose to new heights. For the 12 months of 2008 foreclosures rose 112%.
8. IRS debt is on the rise. This means that more and more people are not paying the IRS the money they owe. Tax debt is a big problem for the United States, as well as those that owe the money.
9. Consumers are not the only ones getting into trouble. Government spending and borrowing is also out of control. In 2007, total debt for the United States, including both private and public sector, grew at a rate of 10 percent.
10. The government is currently facing a debt bill of more than $3 trillion. Much of governments increased spending was geared toward government bail out of many major private financial institutions.

The credit crisis of the naughties has seen the crumbling of the economic foundations of the nation. Will there be major lessons learned for the next decade?