We have a lot more debt and more trouble handling it than previous generations. Does that mean we’re less able to resist temptation or somehow less morally worthy than our predecessors? Not necessarily.
I talk in my book “The 10 Commandments of Money” about how the availability of credit exploded starting in the 1990s, thanks to the advent of credit scoring and loan securitization. Granny simply didn’t have the same opportunities to dig herself into debt–until lately. (And interestingly enough, people 65 and older are the fastest-growing group of bankrupts, which may indicate older folks aren’t necessarily better than younger ones at dealing with the temptations of easy credit.)
The credit crunch, financial crisis and recession dramatically changed who gets credit these days and how much. If you have poor credit scores, rebuilding them is tougher since newly risk-averse lenders are less willing to take a chance on you than in years past.
If you have good scores, though, you’re still in danger of overdosing on debt. Credit card issuers are still fighting for your business, auto lenders are perfectly willing to finance your upside-down purchase and even mortgage lenders will let you get in over your head.
And if you’re a student, you’re at particular risk. It’s very easy to borrow far too much to pay for an education you can’t really afford.
The bottom line: you have to put your own limits on what you borrow.
For more, read my post on the Equifax Personal Finance Blog, “Consumers need to limit debt, because creditors won’t do it for you.”
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