Is Credit Getting Tight?

As you probably know, the economy is struggling and the side effects of this are many. One subject that is being discussed is whether or not credit is becoming tight in the United States. In other words, are consumers going to find it more difficult to obtain a loan? Has the United States become a nation dependant on credit? The answers to these questions will determine the way that consumers live in the years to come.

Compared to last year at this time, credit card debt among American consumers has increased by eight percent. Additionally, of the tens of thousands of people who claim bankruptcy last year, their average credit card debt was approximately $61k.

Many experts strongly believe that a long period of tight credit is on the way. If this happens, here is what you may have to look forward to:

1. It will become more difficult to maintain a large balance on a credit card.

2. Late fees will be more strictly enforced and more costly than in the past.

3. Credit card companies will not offer high credit limits to anybody and everybody. You will truly need an excellent credit score.

4. Annual fees for credit cards will increase.

5. Interest rates will continue to rise.

6. Zero percent introductory credit card offers will all but disappear. Companies that continue to offer these deals will cut back the amount of time tied to the introductory rate.

7. The amount of down payment needed for a car or a home will increase.

As you can see, tight credit could lead to many changes. To go along with the above, you should also realize that this could affect the way you live. For instance, you will no longer be able to use several credit cards to rotate debt by making a balance transfer from one credit card to another. To go along with this, tight credit will affect the real estate industry. It will become much more difficult to obtain a home equity loan or second mortgage.  It may become more difficult for a business to find a short term loan to finance a payroll when the profits fall short for a quarter. You may also need to postpone your plans for a new business if you cant find the venture capital funds.

Executive editor of Consumer Reports, Greg Daugherty, has as interesting take on the credit situation. When asked if it is becoming increasingly more difficult to obtain a credit card he answered:

“Depends. It is tougher than it has been. We have seen instances where   they are extending credit to people who are in deep credit trouble. So it is not always tough. It can be tough to get a good one, like one of these low interest rate credit cards we are talking about. Even people with good credit scores are running into some of these problems: their interest rates are being jacked for no reason they can determine. Their credit limits are being reduced. And this can effect you in a couple of ways. You can go over the limit or it can effect your credit score by changing by the amount of credit you have, you know that ratio they have. So even it you are a good customer you have to be really careful these days.”

Credit may be getting tight, but it is not yet as bad as it could be. As a consumer, you should begin to think twice about every financial move you make.