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Credit Crisis Bring More Woes to Consumers

While consumers’ purchasing power continues to shrink, many are looking to mitigate deficits in income against expenses with bridge financing or short term loans to get through rough times. It’s the only way most people know how to survive until the sun begins to shine again.

Apparently, it’s not going to be as easy as it seems. Following the continuous increase in loan and mortgage defaults, creditors are minimizing losses by adjusting consumer credit ratings or credit scores. At the moment, it has become harder to secure any form of credit. Most consumers only realize this when they apply for a new credit card or a loan. It is ironic that getting credit has become almost impossible at a time when you need it the most. The situation is no different even if you have an immaculate credit reputation or a tainted one. Financial institutions are protecting themselves from risks that have escalated over the last few months.

Credit card companies such as American Express revealed that more and more of their customers are falling behind on payments. Reports also indicate that revolving credit usage posted a growth unlike any that has been seen in 7 years. But as more consumers use their credit cards while the economic picture is bleaker, it is likely that balances will continue to rise that would eventually lead to defaults or non-payments.

For this reason, credit companies lowered their credit limits to prevent consumers from drowning in debt. This is what lead to lower credit scores which now makes it harder for consumers to recover or salvage their liquidity. At the moment, only one word comes to mind in order to survive this stretch of bad times . . . save, save, and save.

Tags: , credit cards, credit limits, credit scores   Posted in Money & Biz, News