Future of Credit

Originally Posted by piercehawkeye45

...So my questions are, first, if this is true or just an overblown speculation? Then, how would this effect our credit system if banks do not trust the majority of people to take out house loans, sacrificing potential profits? As I said, I don't know much about this besides being responsible with credit, but wouldn't a large distrust between banks and loaners cause HUGE problems with the house industry? And if this is true, is their any speculation on possible ways those industries will evolve because of this?

Credit card debt has skyrocketed in the last 10-15 years, currently over $1 trillion, and growing at about three times the rate of new credit cards being issued.

What that means is that millions of people owe far more on their credit cards than any previous time (on average three times as much - while average personal income has not increased by three times as much). As a result, millions of people are late in making even the minimum monthly payments, affecting their credit scores (over half of all credit card holders make only a minimum monthly payment) and millions more are choosing bankruptcy to erase the debt than any previous time and that number is growing...and the banks absorb those losses.

The banks have tried to protect themselves with various hidden charges and exorbitant fees...but the Credit Card Bill of Rights legislation that was enacted last year will put an end to many of those practices. As a result, banks are likely to tighten their policies on issuing new credit cards. At the same time, many of those millions of people who declared bankruptcy will be frozen out of the credit market for 7-10 years.

But, more than anything else, it is a matter of personal financial responsibility....for many, it is probably too late.

added:
The other issue that will adversely impact credit in the short term is the pending crash of the commercial real estate market with many banks wayyyy over exposed as a result of greedy, overly aggressive speculative (and unregulated) lending practices in this market...to the tune of $3-4 trillion. And when that happens, credit will shrink again.