Credit at an all time high

Credit at an all time high

Household debt levels are at an all-time high. Bankruptcy filings have increased. Credit card delinquency and charge-offs are at manageable levels but both are moving upward and are not likely to peak until late 2009.

Maybe we’re in a recession, maybe not. The bottom line for most of us right now is we need to be in a cash position. The stock market has been taking a beating and there have been several bank failures.

I know this blog is about debt and living debt-free but this information is important because if you live on debt you’re going to soon discover that credit is going to tighten because the Big Bankers are not dummies.

The big bankers know that if enough people don’t pay their credit card bills the banks will suffer and tighten the lending standards which creates a chain-reaction for you and I especially if we live totally on credit.

The rise of the “won’t pay” population. There are some folks who just will not pay their debts. This group of people has been increasing in size of late. This only furthers my argument that credit will have know choice but to tighten.

100% home loans are few and far between and many Big Bankers are realizing if they get a down payment toward the house it is less likely the Borrower will walk away from the house. BUT, if the Borrower has no money into the house and the values go down why would they stay in the house?

Once again, this means you need to be liquid. You must have cash, and you’d do well to be debt free. Look at my previous posts about how to get debt free but it is really important to start now on the road to paying cash for everything.

David Dassow