I’ve been reading a lot about our current financial situation and what Congress is trying to do to fix things, and something in a recent article caught my eye. This article discussed what we should know about the current financial crisis. There was a lot about WaMu and FDIC and SIPC insurance, but the point that caught my eye was about credit.
According to economists, consumers trying to borrow money for a loan or a home or trying to get a credit card might find it much more difficult. One key point here was that credit card companies are less likely to take on “riskier clients,” and are “getting tougher on who they lend money to.”
This… doesn’t seem like the world’s worst idea. Of course, I realize that there are some people who are using their credit cards just to get by – they use them to buy food and pay bills. But there are many more people who are spending on their credit cards because they can. Maybe it’s spending on big ticket items, like a new television or video game system, or maybe it’s a lot of smaller expenses, like frequent dinners out. Either way, taking a second look at people in this situation who are looking at getting new credit cards might not be a bad idea. Maybe this is what we need to teach us how to spend properly.
It may also be harder for people to get mortgages due to stricter lending requirements. I was listening to a co-worker talking the other day and he was saying that when he bought his home 25 years ago, he couldn’t imagine not having a 20% down payment. According to what he knew, that was just what people did. I’ve heard similar from my parents. Of course, even if you factor in inflation, a 20% down payment now is more than a 20% down payment in the early 1980’s.
This also doesn’t seem like a bad idea to me. Sure, it means that people will have to save that much more before buying a home. Or they will have to buy a smaller home. But I would think that stricter lending requirements make it that much more likely that a person will be able to continue to make their mortgage payments and not risk foreclosure.
I do realize that this will hurt people, and I don’t want to sound callous. But maybe if the bank or the credit card company isn’t willing to take a risk on you, you should take a second look at your spending and see what you can do to change.