A couple of years back, the biggest threat to the economy was terrorism. Apparently, the National Association of Business Economy now considers bad credit as a big threat to the country’s finances. While others blame it on inflation, business sectors claim that solution to bad credit problems should be addressed immediately or it will cause greater problems in the years to come.
Most citizens wonder how bad credit loans can be a major threat to the country’s economy. The fact that more and more mortgage investors are pulling out their funding from the subprime market is the answer. Because of this, the stock market is dropping. In effect, the value of US dollars also drops. In fact, US dollar has reached its lowest value against Euro in the last couple of years.
If there is anything positive that can be taken out of this news, it is the report that this problem is short term and remedies are being done to alleviate the country’s credit problems. At the same time, investors are optimistic about the housing market.
More importantly, this fiasco is a lesson to most American consumers to be more cautious about their credit. It is also a reminder that proper decision making is important particularly when it comes to debt. It is a wakeup call for those over spenders who use their credit cards without thinking about how they will pay for it.
The business sector encourages consumers to check their debt-to-income ratio. This is one of the best ways to check whether or not they can handle new debts. The trick is to not get additional debits if the ratio goes over 37%. This means debt load has to be reduced first before taking in new debits. Being financially wise does not only help an individual but the entire nation as well.