Early this year, financial prognosticators were saying that the credit card industry was not going to go the way of the mortgage industry (i.e. totally implode) because credit cards had a better financial base.  After all, if a credit cardholder decides to “foreclose” on a credit card, it’s not nearly as damaging to a credit card company as foreclosure on a house.  A mortgage can run hundreds of thousands of thousands of dollars. Anyone with hundreds of thousands in credit card debt is in serious financial trouble.  $30,000 is a lot for a credit card, while that’s dirt cheap for a house.

Add to that the fact that credit card companies are making a relative killing on interest rates and you’d think that credit card companies would be able to weather the financial crisis.  If only that were so.  There’s continuing talk that the credit card industry will be the next big thing to fall apart.  Not only are credit lenders tied to losses in the mortgage industry, but credit cards are having problems all their own.  Recent news from American Express is likely the first in a long line of potential problems.

Amex’s Problems

American Express recently requested $3.5 billion from the Feds as part of the bailout package.  Amex has stated that they’re suffering from lost revenue due to the credit crisis.  In the past, Amex has remained liquid by packaging credit card debt and selling them to investors in the securitization market.  If this sounds eerily familiar, this is what led to the subprime mortgage meltdown, as bad credit mortgages were also packaged and sold to investors and then lost value.  The market for credit-card back securities is fading.

It is surprising, in some respects, that Amex is having trouble.  While spending is down overall, it would stand to reason that credit spending is up due to people not being able to afford necessities with cash.  Buying groceries on credit may not be so financially wise, but for some people it’s the only option.  Alas, it turns out that people are cutting down on spending both with cash and on credit.  Couple that with increased defaults and it is not surprise if credit card companies are feeling the hurt.  For American Express, third quarter profits fell 24 percent, or 70 cents a share.

What Does This Mean for Credit Card Holders?

OK, that’s all well and good.  Amex fell 24%.  What does that mean for your current credit cards, or if you are looking to apply for a card in the future?  Is everyone going to get a 30% APR?  Does good credit matter anymore?  Here are some answers.

If you have an Amex card, you may already be feeling the heat.  Amex recently lowered credit limits for 10 percent of their cardholders.  Don’t rely on notifications because it is possible your credit limit may go down without your knowledge.  What will happen is that you’ll go over the limit and have to pay the resulting fee.  As most credit card terms state that the issuer can change rates or fees “at their discretion,” your APR and fees could very well go suddenly up.  Fact is, if you have an existing balance, there’s not much you can do about this, as it’s written in the card’s terms and conditions.

Your credit cards will still work, however.  One of the fears pre-bailout was that any inaction would totally freeze credit markets so your credit cards would be worthless.  That didn’t happen and it likely won’t happen in the future.  But whenever a lender is taking a hit, be certain that they’re going to raise rates and fees to make up the difference.  This is even the case if you’ve hunted around for the best credit card deal, you have

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Yesterday, the Fed lowered the federal funds rate rate to near zero in an attempt to bolster the sagging economy. The federal funds rate is an overnight lending rate that banks use to set rates for a variety of loans such as adjustable rate mortgages, credit cards, and home equity lines.

For many consumers with variable rate loans, they should see a monthly savings. For example, a family with a prime indexed home equity line of credit would see their interest rate lowered from 4.00% to 3.25%. On a $50,000 draw, their minimum monthly payment would decrease  from$167 to $135.  The same types of saving could be seen in variable rate credit cards however the effect may not be as pronounced since credit card rates have a higher prime plus index.

For the consumers who wonder if this is a good time to refinance their homes, the answer is not so clear. While the goals of the Fed is to lower long term interest rates, their recent moves only lowers short term interest rates. 30 year fixed mortgage rates are consider long term interest rates and often indexed to the 10 year treasury. While the rates on the 10 year treasury are also at historic lows, the credit credit crunch has more lenders charging higher premiums eroding the value of the historically low rates.

So what should you do in this environment to save money? Here are some tips:

If you have a home equity line of credit, consolidate your bills. If you have good credit and an open HELOC, consider consolidating your credit card bills and other expenses. With a prime rate of 3.25%, you will rarely get another opportunity to get such a low priced loan. The caveat is that rates may rise in the future so make sure you have flexibility to move debt around. You are also using your home at collateral so be careful.

Shop for credit card rates. Not all credit card interest rates are variable. If you have a fixed rate credit card from when prime was 6% or 7%, this could be a good time to look into a new card with a lower rate.

Stay on top of this market and interest rates. We are at an historically low interest rate period. As the Fed looks to unfreeze the credit markets, there could be unprecedented opportunities to refinance or purchase a home assuming you have good credit. This period won’t last forever so be savvy, stay on top of the market, and look for your opportunity to save.

As 2008 winds to an end, we have learned that good credit is more important than ever for both lenders and consumers alike. As you think about your 2009 New Year’s Resolution, improving your credit should be at the top of your list for a prosperous 2009.

Consumers considering large credit purchases or those concerned about high monthly payments should make their credit score a top priority. A good credit score is as important as a trusted financial advisor to building and maintaining financial security. Below are are the top ten ways to being the process for better credit.

1. Review your credit report for accuracy: This is the easiest and most basic step in trying to improve your score. Request a free credit report from www.annualcreditreport.com, and then review it to make sure your bank accounts, any late payments, and all other information is listed correctly. If not, report it immediately to the proper bureau. They are required to respond within a month.
2. Pay your bills on time: Just one late payment can reduce your credit score and affect the interest rates you pay on current and future accounts. Keep accurate records and pay your bills on time. These are reported in 30-day cycles so you should check your score at least once a month.
3. Keep credit card balances low or pay down high credit card debt: The amount of credit card debt you carry in relation to your total credit limit is called your utilization rate. The lower your rate, the better for your credit score.
4. Avoid Derogatory Records: Late payments, collections, and charge-offs will lower your overall credit score and can remain on your credit file for up to 10 years. If you are concerned, consider alternatives such as a debt consolidation loan before you miss that first payment. Once the negative marks are part of your file, only time can remove them.
5. Utilize the 100-word credit bureau statement: This is a little known way to help improve your credit image. Under the Fair Credit Reporting Act, consumers can add 100 words to their credit bureau file. A well crafted statement about your unique circumstances or credit worthiness could positively influence a lender. But keep in mind that lenders could still bypass this statement and only consider your score.
6. Avoid excessive shopping for credit cards: A number of inquiries for additional credit looks bad on a credit report. Those inquiries that result in a hard credit pull will also lower your actual credit score. Be sure to research credit cards or loans first and apply only to those that are necessary and for which you are qualified.
7. Avoid retailer credit cards: Retail credit cards can be useful for high credit score customers in search of discounts, but for most customers they are a bad idea. These cards limit purchasing to a specific retail outlet, and the fees or higher interest rates charged for missed payments are often higher than normal credit cards. This can effectively wipe out any discounts offered through the card.
8. Don’t put your credit in a drawer: Many consumers concerned about their credit make the mistake of freezing spending. This can have a negative impact on your credit score because bureaus look for consumers that use credit responsibly. By ignoring your credit, you are not giving lenders current data to consider as a counterbalance to past negative factors. Be sure to use cards at least once every six months and pay off balances.
9. Maintain old lines of credit and accounts: Bureaus consider a long-standing credit line to be a positive factor in your credit score. Even if you no longer use a credit card or line of credit, keep it open. Closing it could have a negative effect on your score. You should also consider using it once every six months to show activity.
10. Protect yourself from identity thieves: Monitor your score monthly for fluctuations that might indicate identity theft. Also be sure to look at every piece of mail you receive and shred those with sensitive information or credit card offers. Identity thieves can ruin your credit score in a matter of minutes.

If you want to avoid paying higher interest rates, and you want to increase your chances of getting a loan, it is important to have the best credit score possible. For many Americans, debt and the problems in the housing market have taken quite a chunk out of their credit score, but luckily, there are many ways that you can easily manage your credit score and start to see some real benefits from your efforts.

The first step to take before you get started is to set up a credit score monitoring service. This will help you see what you are working with and give you incentive to keep on going. The best monitoring services will give you a daily look at your credit score and you can see the changes on a daily basis. This will help you gauge the efficacy of your efforts and help you craft a better strategy for managing your credit score.

Once you have a monitoring service in place, you can begin to work on your credit score. You’ll want to target any existing collections, if you have them, since these can really drag your credit score down. Go over your credit report and see if you have any on file. The report should include contact information for the collections agency and you’ll be able to see how much you owe.

Instead of immediately sending off a check to the agency, you’ll need to first put together what is called a Pay for Delete letter or PFD. This basically informs the agency that you are willing to pay off the debt, but only if they agree in writing to remove the record from your report in exchange. Do not send payment until you get the signed agreement back in the mail. This can be forwarded to the credit reporting agencies if the collections agency fails to remove the record after you’ve paid.

The next step in raising your credit score is to lower your overall balances. If you have a high ratio of debt to available credit, this is going to affect your score adversely. You don’t necessarily need to pay off all of your balances, but you should get them as low as possible. If you have a good payment record with a creditor, you can also request a credit limit increase, since this will make your ratio more favorable.

During the time when you are trying to manage your credit score, it is best not to apply for any new credit. This creates what is called a “hard pull” on your credit report and this can result in a reduction in your overall score. It is best to wait until you have your credit score where you want it, and even then, you’ll want to limit your requests for new credit to around two or three a year.

Following these simple strategies can help you see a large change for the better in your credit score. Staying current on all of your bills is the next step to maintaining that score.

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The impact of the credit crunch is already rearing its ugly head as far as holiday shopping is concerned, because projected consumer spending online is remaining steady at $100 to $250 dollars on average. According to the eBillme Online Spending Index, a quarterly survey that is designed to examine online spending by consumers, the credit crunch is definitely expected to have a strong impact on holiday spending. Index results for the fourth quarter are showing that the credit crunch is causing many shoppers to significantly decrease how much they are using their credit cards, and is also impacting the access that consumers have to credit, resulting in a shift to cash as a necessary alternative.

Thirty one percent of all respondents had indicated that they would be more likely to purchase online if they could pay with cash and have an overall improved control over their finances. This is actually an opportunity for online merchants to optimize their checkout systems by providing additional cash alternatives. The eBillme Online Spending Index, an index that is conducted by Javelin Strategy and Research polled 1,600 different consumers in order to measure their projected online spending, as well as the factors which were influencing that projection, such as the economy, available payment options, financial control and security. This quarter, the index surveyed consumers about their holiday spending in addition to the normal survey. According to data from this fourth quarter, the credit crunch is continuing to put a serious damper on consumer use of credit and consumer access to credit.

- 34 % of consumers are closer to their credit limit than they were a year ago.

- 45 % of consumers surveyed have used their credit card less in the last three months, looking for non credit payment options instead.

- 55 % of people surveyed had indicated that their available credit decreased this holiday season in comparison to last year.

- 48 % of consumers are delaying purchases as a result of uncertainty in the economy.

This quarter’s index also found that as much as 46 percent of all consumers prefer to avoid black Friday shopping in favor of online shopping. As many as 13 percent of respondents are planning to do more of their shopping on Cyber Monday, which is the official beginning of the online holiday shopping season.

The index is based on data that was collected after being taken by an online consumer survey that was deployed in August of 2008. The sample size was 1,608 respondants. The next index by eBillme will be released in January of 2009 and will be posted on the eBillme blog website. You can also visit the eBillme blog website to view more data regarding the current index and the information polled about the credit crunch and its impact on consumer shopping during the holiday.

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There is still money available to be lent out, but in order to get it, people buying homes and businesses must have good credit or plenty of equity. Despite all of the talk surrounding the credit market which is supposedly completely frozen, it is still possible for consumers to pick up big ticket loans all over the Las Vegas Valley and elsewhere, provided that they can meet the terms which are much more stringent now.

According to a local branch manager for U.S. Mortgage of Nevada, nobody is going to offer 100 percent financing right now. If they did offer 100 percent financing, it would come with at least a 17 percent interest rate if not much higher. And if you want to take out a loan so that you can make a purchase of real estate for a company, you are going to be paying down a much greater share than if you were to buy that real state only twelve months prior.

Before granting a home mortgage to a consumer, Wells Fargo bank uses several different criteria that they examine for each of their loan applicants. These criteria include debt to income ratio, credit score, two years worth of W2 tax forms, two months worth of bank statements and payroll stubs. Just about anyone would have been able to get a loan two years ago, but today most lenders are being much more prudent in order to protect themselves.

A poor credit score is more than enough to doom an applicant, even when they have enough money to make a down payment. Major banks are rejecting mortgage applications from individuals with credit scores in the 500s, but by raising such a score to 650 or more, those individuals can suddenly qualify for Federal Housing Administration loans. Meeting new thresholds is absolutely essential if you want to obtain the lending that you need despite the credit crunch and the tighter reins that lenders are holding on their money.

Some lending institutions like Nevada Bank and Trust have taken truly black and white approaches to lending. Even people they know are reputable are losing out to hard line decisions because of how tough the credit market is right now. Small businesses used to easily secure loans of 80 percent or more of the total cost of real estate, but now the numbers are much lower, at 75 percent for owner occupied real estate, 70 percent for investor owned properties and even less for specialty operations. It isn’t just the banks that are playing it safe, but all lending institutions out there.

What it really boils down to is what your credit is like. If you have top tier credit, not even the credit crunch can bring you down. It’s all about having good credit and keeping your credit score up if you do not want to be negatively affected by the credit crunch.

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Only 42 % of United States consumers who purchased a new car or a new truck during the past 90 days chose one that was made by Detroit companies, which is a grand decrease from 47 % a year ago. This is a rapid decline that was more than likely aggravated not only by the suffering economy, but also by the lower income levels that United States customers are experiencing. The credit situation, according to a senior director of industry analysis at the Power Information Network, is impacting domestics more than it is affecting the Asian markets. Detroit automakers have three primary brands, Chevrolet, Dodge and Ford. All of these brands attract buyers that have a median household income that is $5,000 or more below the industry average, according to the Power Information Network.

In this environment of much tighter credit, customers who are making more money are in a much better situation to purchase vehicles using cash. The more recent data from the Power Information Network shows that cash purchases of vehicles have definitely been on the rise in recent months because financing and leasing are becoming the less prevalent options for many consumers.

When gas prices began to go up in the second quarter of 2006, Detroit’s primary automakers experienced a serious headwind, seeing their retail share of the United States market drop below the 50 percent mark. The weak lending environment because of the credit crunch is the second headwind for these automakers to content with. Now not only are consumers tending to buy against options like the large SUVs and pickup trucks that Detroit automakers are known for because of the gas price fluctuations, but also because these higher price tags require higher financing and therefore less purchasing options. The recent retail market share performance of the Detroit automakers is a sign that even automakers are facing serious challenges in this suffering economy of ours.

Some of the other intense challenges that are being faced by the local automakers include perceptions of subpar quality, a lack of fuel efficient subcompact and hybrid vehicles, too many different dealerships and brands, vehicle lineups that are not quite as fresh as with other competitors, and even higher labor costs in relation to what foreign automakers offer. These things are disappointing, and even shocking, but they are simply a continuation of the same themes that we have been seeing for some time now.

Detroit automakers lost a combined 5 % points off of their market share in the last quarter, in comparison to the same period a year ago, which is the fastest year over year decline in two years. During this same period, General Motors lost a percentage point, Ford Motor Co. lost two percentage points and Chrysler LLC lost two percentage points. Two percentage points of market share is equal to the full production for an assembly plant for an entire year.

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There are many consumers out there that want to get out of debt and become homeowners, either for the first time, or once again. But before these people can qualify for the lending that they need, they absolutely must find ways to raise their credit scores. In order to raise a credit score, these consumers have to significantly pare down their debt levels.

This is a problem that is quite common to many Americans, because the credit crunch that we are experiencing is putting serious pressure on consumers to make a dent in their level of debt so that they can return to a more stable life. In order to accomplish this, it is absolutely vital that consumers devise a plan that will allow them to pare down their debt and significantly raise their credit score in the process.

If your goal is to get out of debt, then your first plan of attack is going to be to put together a workable strategy, according to credit counselors. Everyone and anyone can fall into the debt trap, but the consumers who are capable of getting back out are those who are willing to put together an organized method of overcoming those debts. Having a poor credit score can prevent consumers from taking out loans that are vital in orchestrating home repairs, automobile repairs, mortgage refinances and other vital expenditures that simply cannot be avoided. Lenders will often decide that these consumers are too much of a risk to lend to, denying their claims for lending to tackle unexpected expenditures.

A credit score is a number that is designed to summarize your credit risk. This number is based on your credit report during a given period of time. This credit score, which generally ranges between 300 and 850, allows lenders to better estimate the chances of whether or not you will repay a loan that is granted to you. The higher your credit score is, the better deal you will get. Because credit markets have been tightening in the past few weeks, lenders are beginning to really tighten up on their standards, meaning they are requiring much higher credit scores before they will lend out any money. This is why consumers are being forced to tackle their debt before they can get the lending that they need.

The key to paying off your debts is to know what you owe, and then to prioritize your debts. Add them up and determine where they fall based on category. What debt has collateral? What debt is secured? What debt is unsecured? Prioritize by paying secured and collateral based debts first, because you need your home and your car to survive. Then work on unsecured debts, leaving the lower interest rates until last. Tackle your debt slowly, paying off one at a time until you have a handle on your debts and a much nicer credit score and report as a result.

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Because of the problems facing our economy, most consumers are finding it difficult to obtain the lending that they need for things like purchasing a new car. However, what consumers are failing to understand is that the auto makers and car dealerships are experiencing the exact same issues relating to the economy, and are just as desperate to unload their inventories as you are to obtain a new vehicle.

With the current state of the economy, many people are facing poor credit or borderline credit scores, making a new car loan seem like something completely unobtainable. On one hand, consumers are definitely hurting when it comes to obtaining lending, and lenders are starting to cut back on the loans they are offering because of the state of the economy. On the other hand, these car dealerships and other potential lenders are desperate to unload their products to boost their sales and profits, which means that car dealerships are going to have to offer loans and other special offers to consumers if they want to keep their profits from crashing. Here are some brief tips for buying a car despite the faltering economy:

Make sure that you have an adequate down payment.

This shows the dealership that you are serious about buying a car. Your income may not be great, and you may have not have much in savings, but the more you present as a down payment, the better off you will be when it comes to obtaining a loan for the vehicle you want to purchase.

Check with local banks for funding assistance.

Rather than attempting to deal with the nationwide large names check out your local banks. It is the large name banks that are dealing with the most financial issues, and obtaining lending from them will be near impossible. Smaller, local banks are not seeing nearly the same impact and will be more likely to lend to worthwhile consumers.

Shop around on the internet when looking for a car loan.

The internet has numerous opportunities beyond what you will find in person through local auto dealerships. Most internet lenders are much more likely to lend the money that you need to purchase your new car.

Shop around for the right financing before you start looking for a car rather than choosing a car first before seeking financing.

Take your time when shopping for adequate financing, instead of rushing at the very last moment when you have the car you want but not enough money to purchase it.

The bottom line is simple: Auto dealerships are feeling the economy crunch just as much as consumers are. For this reason, they are still likely to offer auto loans and sell vehicles, but only if you are willing to think outside the box a little bit. If you follow the aforementioned tips, you should have no trouble obtaining financing from companies that are not being affected in the same way by the mortgage crunch. Combine special deals from desperate auto dealerships with auto loans from smaller, local banking and lending agencies and you should have no difficult obtaining the lending that you need to purchase the vehicle that you require. Walking into a dealership with an already approved loan is an excellent way to gain leverage over the auto dealerships to get the vehicle that you want at a price that you can handle.

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The financial turmoil that our economy is currently experiencing is regarded as an unprecedented level of turmoil. According to a United States Historian named Steph Friesier, “The time of wielding wealth is over.” What many people do not realize is that there is a lot that consumers can take away from this bank crisis that may someday improve how we relate to money and how we operate within the economy. The Wall Street bubble burst suddenly, and everything seemed to go completely insane, but that does not mean we cannot treat this time of financial crisis as a learning experience.

A few months before the Lehman Brothers company went bankrupt, an executive director within the company which once flourished put his luxury home on sale for a surprising $325 million dollars. Many business tycoons began to sell their luxury yachts and other properties, selling the apples of their eyes. Before this happened, no doubt had been raised about the United States superpower in consumption, as the U.S. had been acting as the engine in the entire world economy, its powerful consumption determining the United States’ role in the global economy as a bellwether. Should the United States consumption diminish in any way, the driving force propelling the economy of the entire world would be knocked from its axis.

What consumers can learn from the bank crisis has a lot to do with tracing the causes to this financial storm. There are numerous different ideas floating around as different nations try to make sense of what has occurred and why it has so easily crippled the economy of major nations around the globe. How can one nation have such a powerful impact on the economies of all other nations across the map? There is an uncommon consensus among economists hailing from different nations, and no one is able to unanimously pinpoint the true influence that the consumption concept imposed itself upon. What snapped the credit links? What created the fall in Wall Street?

Once the balance of consumption collapsed, the new balance would not come into creation quickly enough, causing the world’s economy to seek a brand new bolstering point in order to keep some semblance of balance in place. The ongoing process of dealing with the banking crisis is a process in itself that is being used to seek a new point of economic growth as well as an all new driving force for the world’s economy. Not only is the economy falling in the United States, but like the chaos effect it is driving changes in other nations and drastically shifting the balance of power, at least as far as economics are concerned.

What consumers can learn from the bank crisis, above all else is that the world’s economy is a fragile thing that can easily lose its balance when things go awry. As the United States grapples with its issues regarding lending and credit, other countries and continents are seeing intense changes in the way their economies function.

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