5 Credit Trends for 2012

Gerri Detweiler - Credit Coach

A good friend tells me she’ll be happy to bid 2011 goodbye. It’s been a rocky year for her financially but things are looking up for next year. She’s not alone – I am hearing somewhat better news from other friends and colleagues.

With that in mind, here are my thoughts about what’s likely in store for us on the credit front in 2012:

1. Fewer credit card defaults and bankruptcies. Most issuers are reporting that they are writing off fewer accounts as bad debts than they did in the previous years. That’s good news. Of course, though, fewer defaults means lenders will also likely start loosening their credit standards as they try to figure out how much more they can lend before defaults get too high. We’re not headed for the credit heydays we saw a few years ago, but we could see increasing debt levels over the next few years.

2. The Consumer Financial Protection Bureau (CFPB) gets going, whether certain members of Congress like it or not. While the CFPB still lacks a confirmed director, it’s still moving forward on some fronts. Regulations that fall under the CFPB’s authority – like the Fair Debt Collection Practices Act and the Truth in Lending Act – are being migrated over to the CFPB from other agencies. And it is now taking complaints about mortgages and credit cards, and has launched a student loan education project at ConsumerFinance.gov.

3. Credit card issuers are back to bribing cardholders. Remember those 0% interest offers so popular a few years ago? They’re coming back, at least for customers with good credit scores. There’s a trap in the fine print, though: most offers carry a balance transfer fee of at least 2%, and sometimes 4%. Unlike a few years ago when they were capped at $50 or $75, these fees are assessed on the total amount transferred. Since issuers can’t hike rates at any time for any reason, they have to find other ways to make money on these deals. Rewards cards are also getting very competitive again, promising all kinds of perks to cardholders willing to charge as much as they can on their cards.

4. Housing market remains in serious condition. The number of homes in foreclosure or at risk of foreclosure, as well as the “shadow inventory” of homes not listed for sale by lenders who have taken them back, remains high. And without a serious effort to fix that, it will continue to drag the economy down. As more people walk away from their homes or sell them in short sales, it will become easier for those who are on the fence about whether to “stay and pay” to decide it’s just not worth it. HARP 2.0, the new program to help homeowners refinance their mortgage if they are underwater, launches in early 2012, but my go-to source on this program, Joe Kelly of YouCanRefi.com, says it’s not clear yet how many homeowners will be able to refinance their seriously upside down loans under the new guidelines. I don’t predict many other full-scale attempts to help homeowners in an election year, though.

5. Small businesses still fight for financing. Many small businesses are still reporting that it’s very difficult to get financing, and that won’t likely change significantly this year. But on the positive side, “crowdfunding” websites are one of the hot new ways for startups to get micro funding, and they may make it easier for brand new businesses to pull together enough money to launch – at least on a small scale.