The Subprime Meltdown Is The Tip Of The Credit Iceberg

The ongoing subprime meltdown is merely the first destructive wave of credit catastrophe to wash over Wall Street, according to Slate’s resident explainer. Americans drunkenly bandy credit around in several forms: mortgages are the most prevalent loans turning sour, but credit card debt, student loans, and auto loans are silently conspiring to threaten our macroeconomic well-being.

Other types of consumer debt, which have nothing to do with housing and nothing to do with subprime, are going bad, too. The Wall Street Journal reported today that “about 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month, according to a Lehman Brothers survey of companies servicing these loans.” In October, Fortune’s Peter Gumble warned that a similar plague may soon afflict credit-card companies. In October, credit-card giant Capital One Financial reported that the delinquency rate on credit cards for the third quarter of 2007 was 4.46 percent, up from 3.53 percent in the third quarter of 2006. “Given current loan growth and delinquency trends,” Capital One reported, it “expects the U.S. Card charge-off rate to be around 5.25 percent in the fourth quarter.”

The stock of First Marblehead, which has enjoyed explosive growth making private (i.e., not federally guaranteed) student loans, has been hammered in recent days because Moody’s, the ratings agency, concluded that loans it had made “appear to be defaulting at a significantly higher rate compared to loans originated through school financial aid offices.” The Wall Street Journal reported that “seventeen months after First Marblehead arranged one 2005 package of student loans, 2% had defaulted, according to the company’s monthly reports to note holders. But last month, a comparable 2006 package–also 17 months after issue–had a default rate of 3.98%.”

So what does all this mean to you? The imploding subprime market is already driving up the price of consumer credit—loans of all stripes are more expensive—but things could potentially get much worse. Somewhere between “manageable bad” and “let’s all walk to California and write about the Dust Bowl” bad. If we had the means, we’d come up with catchy colored Livestrong-y “My Debt Is Under Control!” tchotchkes. But since we don’t, we’ll simply beg: please use your credit responsibly.

Debt Be Not Proud [Slate]
FURTHER READING: The Grapes Of Wrath [Amazon]
(Photo: Wikipedia)

Comments

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  1. ARP says:

    Rising costs of food, fuel, etc. are causing those who live on over-use of credit or student loans to miss payments. While it is the consumers fault for their own lack of responsibility, financial institutions never met someone they couldn’t loan money to.

    I wonder if the credit cards will respond by raising rates? It will cause more delinquencies, but they may be able to make it up by squeezing others that much harder.

    Bush has been very clear that he will not allow a recession to happen on his watch. So he’ll lower interest rates and infuse cash into the markets until the dollar is worth as much as the peso. Once a new president comes in, expect the bottom to fall out.

  2. savdavid says:

    Bush and his cronies caused this mess with their bankruptcy bill, kissing up to corporations, tax-cuts for the rich and doing NOTHING for the middle-class which supports this economy. I am completely 180 degrees opposite of the view of Mr/Ms ARP. I think it will take a new president to soften the blow and save the economy.

  3. ReccaSquirrel says:

    Capital One’s increase in delinquent accounts might have something to do with their growing deceptive practices. Due to a set of circumstances, I found myself with a balance $13.00 over my account. I paid the minimum balance that month and the monthly finance charge brought me to $300.64. Being $0.64 over the limit, they charged me, I think $30.00. In my November statement, they said I owed $30.64, which would bring me exactly down to my limit before the finance charge.

    In January, that card is going to be paid off and I’ll never have to deal with them again.

  4. forgottenpassword says:

    So how does this effect those of us who dont have ANY debt or dont plan on having any anytime soon?

    Not boasting. I am just concerned on how this will effect me.

  5. timmus says:

    Three months ago my town had 158 houses for sale, according to realtor.com. Today there are 156 houses for sale. Where is the meltdown?

  6. kingoftheroad40 says:

    Your credit should only be used to loan you money like a mortgage or car and credit cards. I have been with the same car insurance co. for 15 years have a 05 Honda clean record never missed a payment .
    Every company i get a quote from wants $2. dollars to $300. more a month cause of my credit i can’t even get a quote from my own co. without them checking my credit.
    To many company’s have access to your credit to do business with you know a days. Oh lets not forget anyone been denied credit for having to many inquiries on what your score is? not that it matters much i pay 116.00 a month for full coverage on my odyssey
    What is really sad is the Canadian dollar is worth 1.13 u.s. know I’m 33 and i never remember that, I remember a year or two it was .60 cents thanks G.W.

  7. Tank says:

    @forgottenpassword:
    your cost of living will increase – you’ll see a jump in grocery prices, vehicle and heating fuel costs will rise, as well as your electric costs, and the cost of consumer goods.

    the good news – because you don’t have any debt, you’ll (presumably) be able to absorb these incremental increases.

  8. form3hide says:

    did anyone understand KINGOFTHEROAD40’s post?

  9. Pylon83 says:

    @kingoftheroad40:
    You comment is almost senseless rambling. I really tried hard to find a point, but I failed. How can you expect an insurance company to issue you a policy without a credit check? They are in a fairly intimate business relationship with you, not to mention their underwriters and actuaries can calculate your risk level based on your credit score. Is it “Fair?” That’s debatable. Is it prudent for the insurance company to do it? Most certainly.

  10. laserjobs says:

    This is why laissez-faire economics does not work. Self regulation always ends up with an exuberance in greed followed by a crash of fear.

    As the saying goes, give a man enough rope and we end up hanging himself.

  11. kingoftheroad40 says:

    In response to my “rambling” the insurance is simple, down payment based on your dmv file, dont pay they tell dmv and cancel your policy keep your down payment. Intimate business relashionship
    I’m not the boss’s mistress.my risk is my driving record . The point is credit effects to much of our lives personally and everyone else,that is why we pay more for things because of people that screw it up have a trickle down effect look at the sub prime problem,harder to get a loan now more than ever. credit is just that your risk of (paying back money or not) get the point now

  12. Me - now with more humidity says:

    SAVDAVID: Actually, the banks brought this partly on themselves by demanding BK reform — bet they’d rather have overextended borrowers discharge credit card balances and keep paying mortgages, than lose both.

  13. vanillabean says:

    This is not surprising as a three year old, a dog, and a dead person have all successfully been granted credit cards. I’ve gotten credit card offers well over my yearly income. And auto loans, shit, you can finance a new car if your income is selling crack. FICO rewards the overextenders, which in turn is supported by banks and lenders. Now the finance industry is blowing up in their faces and the head of Countrywide and everyone else is chicken littling about recession? Go figure, greedy bastards.

  14. Pylon83 says:

    @kingoftheroad40:
    Nope. Actually, it’s even more muddled before (Which I didn’t think was possible). Insurance is not a “down payment”, that’s a complete mis-characterization of the process. My guess is a large number of statisticians and actuaries would beg to differ as to whether your credit score reflects your driving risk. I imagine it’s has something to do with the fact that people who don’t demonstrate the responsibility to pay their bills/manage their finances don’t act responsibly when driving. If their weren’t statistics to back it up, I doubt they would even care. Furthermore, insurance is a pretty intimate business relationship. They are putting their money on the line hoping you don’t cause some sort of major accident. If you do, they have to pay out (up to the policy limits) and can’t recoup any of that (in most cases). How you got to the conclusion that insurance is a “down payment” on anything is beyond me.

  15. kingoftheroad40 says:

    @Me: Good point

  16. HawkWolf says:

    I doubt that debt affects your risk of getting in accidents. However, it affects your insurance company’s risk of you not paying them.

  17. kingoftheroad40 says:

    @Pylon83:So if you a have bad credit report because of medical problems causing you to default on a credit card for example, like the cost of Rx’s made you decide between medicine or pay a credit card bill you have. many people I am sure can relate to that example, that makes you a high risk to have wreck your fault? When it is your fault, is the only time you cost the insurance company it is not your fault the other guy didn’t have insurance or is under insured.Down payment is how it should work they are not lending you money, a bank is.your risk is higher than the car insurance industry, your life is at stake insurance company’s are in it for money only.The banks are getting what they asked for but we are all suffering for it i like vanillabeans comment

  18. Pylon83 says:

    @kingoftheroad40:
    I’m not even going to bother trying to respond that that non-sensical post.

  19. Parting says:

    @vanillabean: I want a credit card for my cat :) It will be the coolest pet in the neighborhood.

  20. bohemian says:

    @kingoftheroad40:

    He is partially right. Historically insurance companies never looked at credit. This is a fairly new addition. Their claim is that if your not paying your bills on time your an irresponsible untrustworthy person and that transfers into you being more likely to get into an accident. The other portion of that is they think your more likely to commit insurance fraud such as faking a car theft.

    The entire analogy is bullcrap though. Since about half of the people who file for bankruptcy (people who are having financial woes) do so because of medical bills. Getting sick or having a chronic illness does not mean you are irresponsible and a deadbeat. But the insurance industry sees it as such.
    Today more people are in financial problems because of health issues, sketchy mortgages or just pinched because basics have gone up so fast and they can’t keep up financially. None of these people fit the profile of a chronic irresponsible deadbeat.

  21. Cowboys_fan says:

    @Pylon83: And yet you did!

  22. Pylon83 says:

    @Cowboys_fan:
    Touche!

  23. vastrightwing says:

    From what I understand, credit in the US is cheap, like almost everything else, when compared to most other countries. After the crash, it will get more expensive. Obviously, not everyone handles credit well.

  24. Pylon83 says:

    @bohemian:
    I disagree. I realize that some people develop medical problems and those are expensive. However, the reason most people with such problems end up in bankruptcy is because they ignore the bills, and they don’t try to work with the hospital to get them taken care of. They get frustrated, and don’t open or respond to the bills. That’s no one’s fault but their own. It is that kind of attitude that ruins ones credit and makes them a risk. I think the insurance companies are well within the rights and responsibilities to make sure they evaluate the risk of a potential customer in any way they can. I’m certainly not saying it is a perfect system, but it is better than going strictly off a DMV report, which does little to help evaluate risk for anyone other than those with terrible records. What about those with no records, but who don’t drive often? How do you evaluate those risks? The simple fact your driving record is clean does not make you a good risk.

  25. azntg says:

    CREDITORS LOBBY TO LEGALIZE DEBTOR’S PRISONS. Film at 11.

  26. samurailynn says:

    @kingoftheroad40:
    I’m not entirely certain that I understand what you were saying, but I’m going to try. I am really not sure what you mean by the downpayment. The reason that insurance companies are willing to pay for your accidents is that you pay them month after month when you don’t have accidents. They make money from all the people that don’t get into trouble. In order for them to keep making money, they need to know that the people they are willing to cover the cost of accidents for are going to keep paying them, no matter what. To an insurance company, even if it comes down to insurance or medical payments – they still want you to pay the insurance. I have also heard correlations between risk level of a person and their credit history. I don’t know how true it is, because any study can be skewed any way you like, but as far as people I know who can’t handle their bills and have good credit, it does seem to be a likely correlation. I wouldn’t want to vouch for those people and say I’d cover their expenses in an accident, even if they did pay me every month.

    I’m not sure if you’re trying to say that 116 a month for full coverage is a good rate, but it’s not really. I’ve paid less than that for full coverage on two cars (and two drivers) in a large metropolitan area. I don’t know if that’s because of our driving records or because of our credit histories, or maybe it’s both.

  27. Pylon83 says:

    @samurailynn:
    Kudos to you for even attempting to untangle that twisted mess of incomprehensible rambling.
    There are a number of other factors that go into insurance rates, aside from DMV history and credit scores. Age, location, marital status, type of car, garaged or parked outside, grades (if you’re a student), policy limits and deductibles, etc. The credit history portion probably doesn’t account for that much of the policy increase or decrease, as there are many other more important factors that insurance companies consider.

  28. Buran says:

    @ReccaSquirrel: Slightly confused of the significance of the $300.64. You mean, the limit is $300?

  29. Buran says:

    @Pylon83: But why does his own insurer, which already HAS his record on hand and his credit from when he got his policy, need to do it again? They know he’s reliable.

  30. jrdnjstn78 says:

    Speaking of insurance companies and people not being able to pay for their outrageous medical bills causing their credit score to decline, this happened to me. I have State Farm insurance and they explained to me how they use a someone’s credit to determine what to charge. The insurance credit scores are different then credit scores. If I remember correctly it is 1500,1600, etc and I think (not sure) that the higher number means a worse rate.

    Anyways I have had insurance with them for 16 yrs. I pay $78 for full coverage and I have PIP, towing, rental car reimbursement, coverage if someone vandalizes my car or a basket gets slammed into it, coverage for uninsured motorist and the coverage I need. I called State Farm and asked for rates for my cousin with the same coverage as mine, her’s ended up being $150+ and yes she does have bad credit.

    Anyways my cousin was driving my truck and rolled it with me and my kids in it (we were traveling cross country to go to my brothers wedding and it was her turn to drive). Well I live in texas and the insurance follows the vehicle. So I had to use my insurance, since she was at fault she couldn’t file a claim.

    It took State Farm 2 years to pay my medical bills and my kids. I had 16 bills for my kids alone. I could not afford to pay on 16 medical bills every month. My kids had to be air-lifted to a hospital which they charged me $10,000 for each child (even though they shared the helicopter). Some of these bills ended up on my credit even though I tried like hell to call these people and let them know what was going on. I tried to explain the situation and they don’t want to hear it. When you tell them you can only send $10 a month they act like you just told them that you committed murder. They tell you to borrow from friends or family or take out a loan. Anyways it took 2 years for this to finally get cleared up.

    what I’m trying to say is that not all people who have medical bills are ignoring them and not opening the bill. Medical bills are so damn expensive. I wouldn’t wish a major medical problem on anyone. I know understand why people have to file for bankruptcy after getting medical bills.

    The only good thing I can say for the insurance is that my bill didn’t go up and they didn’t cancel me. I could only go up to my policy limit for the medical and pain and suffering for me and my 2 kids. My policy limit was $100,000. I tell all my friends to check their limits and their coverage just incase this happens to them, they’ll have enough coverage.

  31. Rusted says:

    I saw the economy going sour years ago, so I got away from borrowed money. It costs too much and closes off too many options.

    A crash would be a good thing. Just too much old-think in the system.

  32. TechnoDestructo says:

    @Pylon83: How can they issue a policy without a credit check?

    Simple, take payment in advance.

    I’ve never been issued credit by an insurance company.

  33. EmmaC says:

    Some states ban insurance companies from using credit scores in determining rates–like in California for example.

  34. kingoftheroad40 says:

    @Pylon83: So if they use all those other factors to base what i should pay why do they need my credit score it’s bs The 116.00 is in myrtle beach sc were insurance company’s use the tourist population in the summer to to fake numbers to make more profit.Im sure it is no different than say somewhere like Orlando or Atlantic city.

  35. kingoftheroad40 says:

    @kingoftheroad40: YOU MUST WORK FOR AN INSURANCE CO. anyone else think so???

  36. Pylon83 says:

    @Buran:
    I don’t recall any mention of a mid-policy credit check. That’s not what I’m referring to. The poster that started the insurance debate was simply pissed that they check it at all. When he wants a new quote, they give him a new quote, based on a credit check, a DMV check, etc. They aren’t requiring it for a renewal, just for a quote for a new/modified policy. Look at it from the other side, such a check could be beneficial for one with good credit.

    @TechnoDestructo:
    You are completely off base. Have you even read the comments preceding yours? No one said that it had to do with them issuing you credit. It has to do with them calculating your risk. Informed, intelligent comments foster intelligent discussion. Uninformed comments are by their nature unintelligent, and simply derail the substantive discussion. Perhaps a little more diligence on your part next time.

  37. Pylon83 says:

    @kingoftheroad40:
    They are not basing what you pay solely off of your credit check. It simply influences it. Your conspiracy theory about them “faking” numbers is illogical and I won’t try to rebut it.

  38. TechnoDestructo says:

    @kingoftheroad40:

    Are you drunkposting or what, dude?

  39. kingoftheroad40 says:

    @Pylon83: That is because you work for a insurance co? Your defending them to much for me to think otherwise. Maybe not faking numbers but using incorrect data.If I thought my rate was based on just my credit score i would not know they ask questions like married or single ,how many people in your house have a d.l. … to evaluate my risk factor.

  40. Pylon83 says:

    @kingoftheroad40:
    I don’t work for an Insurance company, nor have I ever. I simply understand how the process works, and I think their practices are fair. The last part of your comment is again non-sensical. Are you saying they don’t ask you the questions of marital status, household size, etc.? It is incomprehensible, and seems to have no point (or substance for that matter).

  41. kingoftheroad40 says:

    @Pylon83: Read it again “If I thought” I said nothing about the size of a house “How many people in your house have a drivers license”
    insurance company’s want to know that because they want to know what there dmv record is because they might drive your car. @TechnoDestructo:
    No Im not drunk i hit the wrong icon if that is what your referring to

  42. tzirbel says:

    I do work for an insurance company and specifically provide responsibility score data to our actuaries. We do not use credit score. Credit score basically tells lending institutions how profitable you will be. And if insurance companies wanted to use it most state disallow that anyway. Insurance companies use responsibility scores. That score only relates to how on time you pay your bills. It does not tell us how much dept you have or how over extended you are. My company only uses the score to give discounts. Up to 5% for great credit. So if your 6 month auto term is $300.00 your savings is still a pitiful $15.00. We would not use it if it were not statistically proven to work. And most insurance companies will not deny you coverage based on the score. None the less I still feel dirty about it.

  43. Pylon83 says:

    @kingoftheroad40:
    I read it, and read it, and read it again. It still makes no sense. I said nothing about the size of your house. I said something about the size of your HOUSEHOLD, and it was implied that in the context, and from what you had previously written, that it referred to those in the household with drivers licenses. Perhaps next time I’ll use smaller words, and not assume that you will pick up on anything that is implied.

  44. Snarkysnake says:

    To all of the posters on “insurance” when the point of the article is “the credit meltdown that is on the way”-Go jerk off to a geico commercial and boo hoo about the way you are getting buttfucked by your insurance company somewhere else…

    Back on this planet,the credit meltdown is real,systemic and kinda scary.No doubt,a lot of folks are overextended and are dangerously exposed to a job loss,serious illness or banks refusing to extend larger lines of credit.After years (it seems like decades) of aggressive marketing of debt by the big card issuers,the days of easy (it was never cheap) credit may be numbered.Card issuers and credit scorers had a relatively easy job when home prices were rising because the expanding equity in a lot of cardholders homes gave them a cushion against a sudden financial collapse and default.With home prices falling and many equity lines tapped out,that cushion is looking a lot less certain and clearly banks and card companies are pulling in their horns.A lot of marginal borrowers are about to re-discover what their grandparents told them in their youth-A bank won’t loan you money ‘less you don’t need it.

    Losers-The greedy,deceptive card issuers that have built a system that is designed to saddle cardholders with gotcha fees,soaring interest and penalty rates that are like throwing a boat anchor to a drowning swimmer.Politically,when the pain gets too much to bear,they will be subject to fee caps,interest rate rollbacks and other curbs by a vengeful congress.(Won’t happen ?- ask the sub prime mortgage investors if the government will step in)

    Stupid,short sighted consumers that have abandoned any pretense of restraint and moderation in their materialistic pursuit of a lifestyle that they clearly can’t afford.The fun’s over and now the bill is due.They are lunch.

    Winners- As always,when the music stops there are going to be people well positioned to take advantage of the chaos.These people are absolutely vital to the health of the financial system.They provide the equilibrium that the markets need to turn a cycle from panic to order.These are people that are NOT in debt up to their bunghole.Cash will be king.Paradoxically,banks will court these people with even more fervor because they have managed their finances responsibly.Assets will be available cheap for the person that has kept their powder dry.Fortunes will be made (or maintained).

    Which category will you fit into ?

  45. joemama321 says:

    Some facts:
    Your insurance score, which is a derivative of your credit score, is used in assisting insurance companies underwrite your policy.

    Credit score, therefore insurance score, has been found to NOT be correlated with income or race. Therefore, it cannot be used as a discriminatory factor.

    Credit score has been used in life insurance and commercial insurance for a long time. It is not new to insurance per se, but it is to auto insurance.

    Lastly, no study has show conclusively WHY it works, but it works.

    Now, here’s why it MUST be used:

    If it’s not discriminatory to protected classes, legally, it should not be disallowed.

    That forces companies to use it. Follow along:

    For example, say State Farm uses credit scoring and Allstate didn’t. Allstate’s insureds with good credit would be subsidizing those with bad credit, since Allstate would not charge differently, all else equal, to those with differing insurance scores.

    Rational customers of Allstate with good credit would flock to State Farm, since they could get “a better deal” while rational customers of State Farm with bad credit would flock to Allstate for the same reason. A classic adverse selection problem.

    This would all be well and good except that Allstate would take a one-time hit to revenues for insureds in the policy period following the flocking. Additionally, Allstate would be precluded from charging an actuarially fair rate in many states because state insurance commissioners must approve rates before they are used. This means that Allstate could only charge less than the amount of claims, which is not sustainable. Allstate could not react and go bankrupt or leave the state. That leaves less competition and a higher likelihood of higher prices for everyone.

    The bottom line is that insurance is a way to pool risks and smooth expenses, not a way for people to make out from the system and not pay their fair share. Smoking has never been proven to cause cancer in a strictly causal sense. Should we strip it as an underwriting factor for life or health insurance? Of course not. If people with poor credit have higher claims, they should pay more.

  46. Pylon83 says:

    @Snarkysnake:
    Your comment is rude, unnecessary, and contributes little to the discussion. It’s a rant that if toned down in vulgarity, wordiness, and stupidity might actually have a point. However, as presented, it’s worthless, offensive, and make you seem like an ignorant, egotistical jerk.

  47. Pylon83 says:

    @joemama321:
    Well put, well researched, and very informative. THESE kinds of comments foster intelligent discussion. Comments like those of Snarkysnake foster nothing useful other than acting as flame bait.

  48. Martha_Jones says:

    The problem is that the younger generation has been forced to get more schooling as a high school diploma is just about worthless. This adds up to a lot of people who should be getting their first jobs, cars and homes not even being able to afford their student loans because they can’t get a decent job because if they can find a job they can’t find a decent paying one or move up because the baby boomers aren’t retiring.

  49. Brad-O says:

    Hey Timmus (I know you posted way back at the beginning but I had to respond).

    3 months ago was September, still at the tail end of the high season for selling houses. Now is December, definitely the low low point. The fact that there are only 2 less is amazing. Check your year over year stats for houses listed in December. I bet its a huge increase.

    Seriously, it must suck walking around stupid. Does it Timmus?

  50. HRHKingFriday says:

    @Pylon83: Well at least they were on topic. Finally.

  51. Pylon83 says:

    @HRHKingFriday:
    The credit and insurance debate was on topic. Sort of. Well, it’s the other guys fault for taking it off topic. Bah.

  52. kingoftheroad40 says:

    Yes we stretched staying on topic somewhat but our (non vulgar) debate is just one example of how the entire bank and credit scoring system is screwed up. We all had a lot of good points / opinions that is what the comments is for.Thank God for free speech.

  53. kingoftheroad40 says:

    @Pylon83: I agree with you this time

  54. kingoftheroad40 says:

    @Pylon83: About snarksnake that is

  55. Tyr_Anasazi says:

    Hmmm…maybe greed isn’t so good after all…

  56. @timmus: California.

  57. Bobg says:

    I have to agree with many of the posts here. I pay cash for everything and don’t own credit cards. Why should I pay 25% of my income to live beyond my means and get into financial hell? My credit report is neither good or bad; it’s 100% clean. I still recently financed a car. I work for a mortgage company and I would estimate that 50% of the people have credit collections on their credit report. The percentage is even higher for medical collections. It seems that doctors send the bills to collections after thirty days. Beware-old debts keep getting sold time after time even though they might be legally noncollectable. It doesn’t matter to these leaches; they will still hound you to death.

  58. @Pylon83: My husband does some collections work for a local hospital (he’s an attorney). Very rarely do they deal with people who ignored the bills. They mostly deal with people who’ve been desperately trying to pay the bills or work out a payment plan, but who simply can’t manage $60,000 in bills on $30,000 a year with one adult not working because of cancer.

  59. ladycrumpet says:

    @azntg: It’s ironic that during colonial times people were sent here to debtor’s prison, and today many Americans remain shackled to debt, often through their own poor choices.

    Hopefully I’ll be clear of my credit card debt in six months, and then I can build up my retirement fund and tackle my student loans. My credit card debt comes from stupid, short-sighted choices, but my student loans were definitely a career investment.

  60. HRHKingFriday says:

    @ladycrumpet: I wonder if debtors prisons will ever make a come back. I understand that a lot of people have student loans, mortgages, medical bills, etc. But people being irresponsible with consumer debt is ruining the party for the rest of us. I guess it comes down to whether its more profitable for banks to continue lending and just keep you shackled figuratively, or to put you to work in a debtors prison.

  61. Pinget says:

    Never forget that behind the credit crisis is a rising inability to pay for health care and college tuition. Health expenses are still the number one cause of financial difficulty in this country, leading people to borrow when they wouldn’t otherwise.

  62. Anitra says:

    @HRHKingFriday: Couldn’t the garnishing of wages be looked at as a modern form of debtors’ prison?

  63. jrdnjstn78 says:

    @Bobg:

    So true about the last part of your comment. I had a Mervyn’s CC back in the day when I was stupid about credit. Anyways the account was closed, mind you this was over 12 yrs. ago. I just got a bill in the mail for this debt (I had always thought that I had paid it off). Apparently I didn’t pay it off.

  64. anatak says:

    @Carey:
    “Somewhere between “manageable bad” and “let’s all walk to California and write about the Dust Bowl” bad. If we had the means, we’d come up with catchy colored Livestrong-y “My Debt Is Under Control!” tchotchkes. But since we don’t, we’ll simply beg: please use your credit responsibly.”

    This is exactly why the whole ‘good debt / bad debt’ argument is bunk. Its all bad. ‘Manageable’ debt quickly becomes unmanageable and thats when the house of cards starts falling. “My Debt Is Under Control!” tchotchkes? Maybe “My Debt Is Under Control! — For Now!” Mine says “FREEDOM”, as in debt freedom. This is not to be braggy, but simply to say that this game of justifying your debt because of low or no interest is not a plan – even for people with good credit, as we are seeing here. Proving once again, the FICO score is not a measure of success, not a measure of winning, not a measure of even financial responsibility. It is simply your past ability to pay payments on multiple fronts over a period of time.

  65. theblackdog says:

    *shrug* It’s not going to hurt me because I am doing everything I can to be frugal so I can pay off my credit card.

  66. kimsama says:

    @timmus: Whew! It’s a good thing the whole U.S. consists of your town. We’re safe.