Americans waited with bated breath on our congressional leadership to resolve the debt ceiling crisis, which happened at the 11th hour. Mortgage market observers suspected, though, that the real consumer crisis potential posed by the debt ceiling debacle had not been avoided at all. And that suspicion was confirmed on Aug. 5, when Standard & Poor’s (S&P) downgraded the U.S.’s AAA credit rating to AA+, which is the first time the country’s credit score has ever dropped since it first was rated in 1941.
AA+ might not sound too terrible, but analysts estimate that this seemingly small credit glitch will cost the government an additional $100 billion in increased borrowing costs! (These costs, incidentally, will trickle down to increased fees on government-backed home loans and increased interest rates on all types of mortgages, for consumers.) If you’ve ever had a credit card on which the bank jacked up the interest rate, you understand what increased borrowing costs can do to your monthly budget and to your ability to make the bills.
Hopefully, one bright side of this debt drama will be to shock the nation into deficit-reducing action. Another silver lining? There are three key lessons we can all take away from the nation’s credit downgrade and apply to our own personal finances: