After Great Depression 2.0, will there be a change in credit score requirements?

Perhaps this is a byproduct of too many media outlets covering one of the greatest recessions of our time, but it doesn’t appear that things are getting better. Instead of the financial bailout, we’re hearing of the United States auto bailout. Everyone wants a bailout, and hey, can someone bail me out of my student loans?

One of the questions that the upcoming administration are forced to address immediately is the significant financial impact to the American people. Hoards and hoards of people are getting laid off, and from the blue chip companies! Citibank had a recent announcement of laying off thousands and thousands of employees. But, we all know this is the current state of affairs.

What I’m curious about, is five years from now, what will our economy look like? I’ve heard in the past that the average credit score was between 680-720. What will be the average a couple years from now? Will banks and financial institutions be forced to change their standards so people can buy and lease cars and homes? Or will government programs enable the average person, who has taken a financial hit during this crisis to get that lease?

My guess is that it will be considerably more expensive so that the financial institutions can cover their risk.

In the past, the American people relied on these outlets during personal financial stress

1) 401k

2) Home equity line of credit

3) Refinancing existing debt

4) Find a second job

5) Borrow money from friends and family

6) Last resort, beg, borrow, and steal (j/k)

Right now, everyone’s 401k is in shambles, banks aren’t enabling most people to refinance or withdraw from their home equity line of credit, they can’t find a second job (or keep the first), and their friends and family are struggling as well. Instead, you can’t pay back your obligations in a timely fashion, and as a result, your credit score is taking a nosedive.

After the dust settles several years from now, what will have to happen for the financial institutions and the American people to once again trust each other, and make rational decisions? Was there too much scarring during this time? Will banks and people remember what has happened during this tragic point in our history?

What will happen for small businesses and start-ups, who don’t have the financial recourse to start a business because of the lack of capital raising opportunities? I think that the speed of innovation will come to a screeching halt if we, fellow entrepreneurs, don’t have the capital to successfully disrupt inefficient industries. Even the best idea in the world goes nowhere without capital. Banks have always been hesitant to lend to start-ups since the beginning of time, and SBA grants are contingent on certain credit scores and asset levels. Where’s the fuel of innovation going to come from?

Mark Cuban said it best when he stated that one thing we know about our U.S. economy, is that it’s destined for boom and busts. I believe that several years from now, the scarred minds will need a mental bailout, for our economy to once again regain it’s presence in the global marketplace.

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