By:
Lissette Saca
July 29, 2011 8:00pm
3 days left. Just 3 days for the debt ceiling to be raised in order to avoid a default on our nation’s debt. Today the house passed the GOP debt plan and now the vote moves on to the senate for approval. Though it seems that we are moving forward in the debates, there is already speculation that the debt bill is DOA before it even gets to the senate, largely in part because the senate is mostly democratic (none of which seem to support the bill). The debates in Washington have not only caused a stir amongst law makers, they have also piqued the interest of Americans who wonder how what is decided in the next few days will affect them and their wallets.
One word that has been used in the debate which has sparked the interest of Americans and has made the debate personal is credit rating. There are three credit rating agencies which determine the country’s credit rating: Moody’s, Standard and Poor’s (S&P), and Fitch Rating. The US has consistently earned a AAA credit rating since the founding of Moody’s in 1909, a rating which was in jeopardy a short while ago. Towards the beginning of the debt ceiling debate and amidst possible talks of default (though now that possibility seems unlikely) credit agencies reported that if a debt deal was not reached soon, they would be forced to downgrade the nation’s credit rating. As the debate progresses, however, credit rating agencies have stated that the US is likely to keep Moody’s AAA credit rating though agencies might instead shift the US outlook to a negative one in order to indicate the uncertainty faced by the US in recent debt talks. And while this may not affect the US as much as a change in its credit rating, it will increase caution on the part of lenders and the effects on your wallet may be felt soon.
It is thanks to the US’s AAA credit rating that the nation benefits from having the lowest lending risk and therefore, the lowest interest rates than in other countries. Without that top rating, lending becomes riskier, forcing lenders to demand a higher rate of return on their investments through the use of higher credit card rates, student loans, mortgages and car loans. CNNMoney article “
Debt Ceiling and your Money: Now it’s Getting Personal” breaks down each of the above categories and explains when you will notice the higher rates. And though not all are immediate, they will all be felt. It is crucial for the American people to become involved with the decisions that are made in Washington, as they will directly impact how you interact with your lenders and, often, where your hard earned dollars go.