Consumer Credit Engine
April 21, 2008
For the last two decades or so, it has been the average American consumer who has fueled the engine that drives the American economy. Consumers account for nearly seventy percent of the gross domestic product in this nation.
Until now, the average consumer has relied heavily on debt and credit to fund his or her spending. This reliance on credit has brought about some serious problems, all of which need addressing.
As prices for virtually everything go up and wages remain level, many consumers are finding it harder to pay their bills on time and in full. This is especially true for those with heavy credit card debts.
As consumers become maxed out on their available income, they, of course, buy less. When consumer buying drops off, as it is currently doing, the overall economy suffers.
To carry this one step further, as consumers begin to miss payments on their loans, lenders have to deal with their own losses. The result is that they are less likely to make new loans. This shows up as a tightened credit market.
One way that consumers can help themselves while at the same time helping to get the fuel back into the economic engine is to simply pay on their current bills. As more consumers fall into default status the credit crunch can only get worse.
While many families are finding it hard to make payments in full and on time, others can do so with some financial discipline and budgeting.
Not only does this help the overall economy, but it also helps consumers to maintain higher credit scores and better looking credit reports, both of which are imperative for future borrowing.