Credit Forecast: 2012

2012 is likely to be a year of credit recovery thanks to the legislation of 2011 as well as the evolution of consumer outlook on their financial needs versus wants list. It of course can’t be set into stone that 2012 will bring about an even better economic and credit climate than last year, but there are six factors which forecasters consider positive indications.

1. Higher Credit Scores – Overall economic stability likely means higher credit scores across the board. National unemployment dropped from 2010 to 2011 and has indications of further dropping in 2012. How does this mean higher credit scores? Typically consistent income and jobs is a direct indicator that consumers will be able to pay their bills on time and therefore be able to maintain a healthy credit score.

2. What Frank-Dodd did Part 1 - The Frank-Dodd act of 2010 put into effect as of October 1^st, 2011 a multitude of financial policies to benefit and protect consumers. One of the many changes under this law changed transaction fees banks are allowed to charge on debit card transactions. Since October we’ve seen a bit of flip-flopping of banks attempting to enact a monthly debit card fee. It’s hard to say where this will land but its more than likely that we will see less debit card use and a rise in pre-paid “debit” cards as well as rewards credit cards. An increase in credit card use should help boost the credit economy.

3. What Frank-Dodd did Part 2 – So much recent and overall successful activity in consumer protection will likely slow the need for any large legislative acts for this year at least. Combined with all of the changes brought about by the Frank-Dodd Act, but also the benefits of the CARD Act of 2009 we’ll likely see a year of stability which will not cause any dramatic changes by credit card companies.

4. It’s an Election Year – It is fair to say that presidential election years, especially when the current President is up for reelection, we can count on relative stability across the board. Whether it is strategic to appease the masses or a political standoff creating a complete clog in any sort of legislation, we can count on not much happening.

5. Deeper Pockets – Things have been looking up for credit lenders. Maybe the Frank-Dodd Act has come to the rescue of these lenders as well because they are making better profits than in 2010. What this means: they’ll have more money to lend in 2012 and will likely loosen up on their application standards.

6. It’s Ugly in Europe – Things may be bad economically here, but it’s even worse across the pond. It is unlikely that things are going to turn around there either which means the US dollar won’t be struggling against our biggest global competitor. This is a good thing to ensure our stability.

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