Unless you’ve had your head buried in the sand, then you know rising interest rates, and our out of control inflation has been the hot topics this year. I want to discuss today the effect this will have, and
why having your credit in the best condition it can be is crucial for you. These impacts, I feel will affect the average American for years to come. How far will it go? How long will it last? These are two very important questions I am afraid I do not have the answer to. I do know regardless of how much or how long it lasts, a good credit report is going to be crucial for everyone.
How rising interest rates affect the average american consumer
This article from USA Today discusses how the Federal Reserve’s rate hikes affect everything from credit card debts, mortgage borrowing, and car loans. Unfortunately, the cost of borrowing money is going up. Every consumer is affected. If you have existing credit card debt, it is going to become
even harder pay off. This is because credit cards do not have a fixed rate. People in Adjustable Rate Mortgages (ARMS) are affected the most, along with those who have been in the middle of a mortgage application who have not reached the point of locking their rates. Personally, I am affected by this as I am building a new modular home. Since construction loans on homes that are constructed with modular technology cannot be closed until 6 months prior to completion, I have taken a hit as well. I have to wait until the manufacturer of my new home informs my builder that the date of completion of my home is 90 days out before I can get the numbers to my mortgage lender to start the process of closing my loan before my rates are locked. When I started this process in early April interest rates were just under 4%, now those rates are around 5.5%, and with the Federal Reserve’s announcement yesterday (6-15-2022) of a 75 basis point rate hike, that rate has gone up again. This means by the time my loan is locked and closed, I will be paying THOUSANDS more over the life of the loan, and at least $200-$300 more on the monthly payment.
A Double Whammy For The Average American
The American consumer is the one suffering, especially low income Americans. It’s really a no win situation for us. We all feel the pain of inflation in our everyday expenses such as gas and groceries. Prices have skyrocketed on everything! Now with rising interest rates, the American consumer is taking a double hit! Of course, the Federal Reserve is attempting to lower prices with these interest rate hikes, but in reality, if prices do drop, it will be awhile before we
see those effects at the grocery store, and at the gas pumps. Many economists are predicting the effects of the rising interest rates is recession. I discussed this in a prior article which you can find here. Here are a couple things how the rising interest rates, and the Federal Reserve’s moves to combat inflation hurts the Average American.
- Continued Rising Costs For Everyday Expenses – While the Fed’s moves thus far have provided no relief for Americans, expect prices to continue to rise (maybe at a slower rate, but still more inflation none the less).
- Huge Losses In Stock Market Investments – The stock markets are taking a huge hit. Americans who invest, especially 401(k), will see those losses hit their balances hard.
- Layoffs and Unemployment Rising – Unfortunately with recession comes job loss. Some companies will have to downsize their workforce to survive. To remain competitive when larger corporations begin to lower some prices or hold current pricing, smaller companies need to keep up. Inflation has caused many employers to raise their current employee salaries. Smaller companies may not be able to absorb this difference and may have to lay off or eliminate jobs altogether. Some companies may even have to close their doors as regardless of what they do, they cannot stay afloat. Consumer demand will begin to drop as they can no longer afford to blow money when prices are high.
- Consumer Credit Will Become Harder To Obtain – Lenders aren’t fools. With rising interest rates, consumers will no longer be able to afford to get into larger debts, they also know with inflation the cost of living is higher, and with potential job losses, consumers will be more likely to default on their debts. Lenders will be raising the bar with their lending requirements making it harder for someone with mediocre to bad credit to obtain the credit they need. During the 2008 recession and housing market crash, it even became difficult for consumers with 700+ credit scores to get approved for a mortgage in some areas of the country as lenders raised the bar on their lending requirements.
Why Good Credit Matters
Good credit is going to be key to getting a more affordable interest rate, and also key to surviving the predicted recession as a result of the rising interest rates. Getting the best interest rate with any loan, whether it be a mortgage, car loan, or credit card, will be
essential to having affordable monthly payments on whatever loan you are going for. Also, lenders across the country have already begun to raise the bar on their minimum credit score requirements to be approved for lending. Although some areas are still seeing favorable growth, other areas it’s difficult for consumers to obtain credit. As this happens, it will become harder and harder to qualify, and even harder to get a good interest rates. It could get to the point we see some folks with 700+ credit scores get sub-prime interest rates or get declined for a loan. Fixing your credit now can help you get qualified for lending, but can also help you get the best interest rate possible. At Credit Wellness Solutions, we employ the best strategies to achieve maximum results. Everything from credit building, credit education, debt collection audits, to our credit repair program. We have the tools to help you get the most out of your credit profile.
How rising interest rates affect professionals who rely on consumer credit
As interest rates continue to rise, and as pricing continues to rise, consumers will have a harder time affording your products. Also, lenders are tightening their belts and making it harder for consumers to obtain credit. This is especially true in the real estate industry.
To make matters even worse, consumer demand will also begin to fall (in some areas of the nation it already has) as affordability for consumers change. Working in an industry where you are paid on commissions and rely on consumer credit to sell your products, it is crucial you make certain your consumers can afford the payments, or can be approved for the lending they need to purchase your product. A partnership with a reputable credit repair company can help you.
Credit Wellness Solutions works with many professionals who rely on consumer credit. Like mortgage lenders, real estate agencies, car dealerships, and car salesmen. We help them by helping their clients qualify for the loan, or help them qualify for a better interest rate on their loans so they can afford the payments. This is not limited to the real
estate industry, and the automotive industry. We can help any professional who rely on consumer credit to make a sale. Ask about our Affiliate Program. For every client you send us who signs up for services, we give a small commission just as a thank you. Unfortunately for those in the real estate industry, federal law prohibits us from paying you a commission, but you will get the result of increased sales from our partnership.
In Conclusion
We are living in very uncertain times. No one truly knows the extent or how long these rising interest rates will last. One thing you can take to the bank is this is going to hurt consumers and drive our economy into recession. Although many will hold off on major purchases, your credit is still one of your most valuable assets. In fact, during times like these, access to credit could be your lifeline.
We can help you ensure your credit is in tip top condition. Schedule a Free Consultation to see how we can help you be prepared.
