The Mortgage Crisis could be turning into the Credit Crisis

The putrid state of the housing market may soon be spilling over into and affecting the    average everyday credit card user’s life.

Hundreds of thousands of Americans have lost their homes because they can no longer afford their mortgages and delinquent payments and defaults on loans are the highest they’ve been since ’02-’03.  This means that banks aren’t getting their money and if this trend continues it could have a negative affect on everyone, even those of us who have been capable of managing our debts in the past.

Without the promise of an economic uprising anywhere in sight, here are some of the things that may very well be in your and every other credit card holders near future:

Difficulty obtaining credit

In an effort to ensure that they will get paid, many banks will initiate higher standards when making the decision to extend credit to a consumer or not.  So you should no longer be expecting to see pre-approved application after pre-approved application in your mailbox, each with a lower interest rate than the one before it.  Consumers are now going to need to prove themselves to potential creditors with a high credit score and a long history of making on time payments.

Not as much credit out there to be had

If your credit score is high enough to be among those that can obtain new credit, don’t expect your limit to be very high at the start.  This is another safety feature for the bank – if your limit is set at five hundred dollars, than the maximum amount of debt that the bank will have to write off if you happen to not pay is five hundred dollars – the more credit they extend, the worse they can possibly be hurt.  This can also work against you with your existing cards – even if you’ve been on time in the past, if you are late on a payment or two now the bank may see fit to drop your limit down a bit to cut off further spending.

Debt collectors knocking at your door

Banks, above all else, want their money, so with the frequency of defaults and write off on the rise, expect a lot of banks to offer up delinquent debts to collections agencies a bit faster than they would have in a more stable economy.  If an eager collection agent can track you down and squeeze some funds out of you, then that bank will at least get a portion of its money and something is always better than nothing.

It’s always important to keep on top of managing your credit, but with the impending circumstances that are totally out of your control, it’s time to be steadfast in properly maintaining and managing your credit, or you may end up with no credit at all.