By now everyone knows that the economy is close to collapse.  Banks and lending institutions are the most responsible for the mess.  It was created by greedy lenders preying on those with poor credit.  In the late 90’s and early 2000’s credit became available to just about anyone with a social security number, and some cases even to those who don’t.  Credit card, personal loans, payday advances, and mortgages were readily available to people with bad credit.

The downside of this easy credit is that common sense evaporated when lenders started giving loans to those with bad credit.  Unfortunately, those with credit problems had to pay much more for the credit to be able to access the loans.  No one in the credit industry were concerned with the fact that easy credit prevents the poor from ever achieving a better way of life. 

Credit card companies preyed on the lower class and those with credit problems by giving cards to these people.  Their sights were set on the profit they would make by charging 30% interest rates to those desperate for credit.  The lower class is, in general less educated than the average consumer, which makes them an easy target for credit card companies, many of whom will go to any length to “hook” the borrower.  Credit card companies also falsely perpetuate the myth that having one of their cards is necessary.

It should not come as a surprise that when the consumer with bad credit defaults on payment their bad credit becomes even worse.  Not only are they now faced with a dismal financial situation, they also have to deal with debt collectors harassing them.  This downward spiral leads to depression, divorce, and a feeling that there is no way out.

The catch 22 of this situation is that if you can’t afford credit because of bad credit you have to pay more to get the credit you want.  Those with good credit pay less for it which on one hand they deserve but on the other hand the poor are penalized for being poor which leads to default.

The subprime mortgage industry has probably contributed the most to the pain we are all feeling now.  By giving loans to anyone they have caused the entire economy to crash.  Those borrowers who got mortgages despite their bad credit were lured by lenders into APR’s that they can afford when the loan begins but then face foreclosure within a few years.  These defaults, have contributed to the drop in home prices and cost everyone money.  Because of the mortgage industry’s greed many consumers were led to believe that they could afford what they couldn’t which has led to0 many who have lost everything they have, including a home for their families.

The damage has been done and will probably get worse.  The only positive consequence of this disaster is that now it is very difficult to credit, which makes it nearly impossible for those with bad credit to get it.  This is the way it should be.