Rising inflation and unemployment figures me that it is arguably harder than ever for the average American to manage their money. The consequences of the global economic recession, which began in 2007, have hit the everybody hard.
The effects of house prices tumbling, unemployment rising and the cost of living increasing has affected everyone bar the very wealthy. More and more people are taking out loans to cover their everyday living costs or paying monthly bills with credit cards.
Historically, loans were used for large purchases such as a car or even a house, because a mortgage is, in effect, a loan. However, loans are now being used to consolidate debts too.
Loans can be very useful if you are able to access them, because the financial institutions are less likely to give credit to individuals at the moment, although hopefully, this will improve with time.
Banks were badly burned by the sub-prime mortgage scandals that have contributed to the country’s current poor economic status. With less credit available, consumer spending has decreased too.
This is bad news in terms of economic recovery. When the dearth of credit is combined with a lack of disposable income, the overall economic picture looks gloomy.
When everyday Americans stop shopping, the knock-on effects are significant. Retailers and wholesalers struggle to sell goods, whilst manufacturers find their order books are less than full.
All these businesses employ individuals who have their own families to care for, so a lack of consumer buying and confidence throughout the nation filters down to affect the individual negatively.
Statistics published by Forbes suggest the typical American household debt is a whopping 136% of household income. Living is expensive and often times, borrowing money is the only option.
With banks being reluctant to lend money at the moment, it is important to improve or repair your credit score so that you can access the best financial products.
Individuals who have a good credit rating will be offered the best interest rates because they are seen as more reliable when it comes to making repayments.
Instead of a very high interest rate (often referred to as an APR, which stands for Annual Percentage Rate), the individual will save significant amounts of money with a much lower APR.
The APR determines how much extra you pay back on credit cards, loans and other financial products. In theUS, the FICO score is used to assess the credit rating of an individual.
The maximum FICO score is 850 and the minimum is 300. The closer you are to the higher end of the scale, the better the deals you will be offered from banks and finance companies.
A score of 300 is the most negative score and needs to be improved upon rapidly. In fact, if your FICO score is below 600 or so, you should look at ways to improve it.
This can be done by always making repayments on time, combining debts into one manageable monthly sum if necessary and seeking out advice from reputable, often voluntary, organizations. As credit scores improve, consumer spending will increase and hopefully,Americawill soon be experiencing happier times.