Quick Credit Cards

If you’re tired of having to wait for your paper benefits check in the mail, listen up! The U.S. Department of Treasury announced waiting for those paper checks are soon to be a thing of the past. The Treasury will now provide all federal benefits through a prepaid “Direct Express” Debit MasterCard. This also goes for the 8 million of you receiving Social Security Disability Insurance benefits. This scheme is projected to save Saving Social Security, and ultimately the taxpayer, $1 billion over the next decade with the absence of paper costs. You can also choose a direct deposit option to your checking account. Either way you go, you don’t have to choose until March 1, 2013.

There’s bad news brewing for Illinois residents.  This New York Times article identifies an almost unconscionable 66% increase in the state’s ie tax rate, from 3% to 5%.  Additionally the corporate tax rate will go from 4.8% to 7%.  This will inevitably mean less disposable ie and less discretionary spending by employers.  The real question, in my mind, is how is this going to impact the credit scores of our friends in Illinois.

This is a simple math problem.  Whenever you have less money in a paycheck you have less money to put toward bills.  Now, I’m not suggesting there will be a large scale increase in the default rates of Illinois residents but I am suggesting that it will go up to some extent.  Even worse, the decrease in “take home” will also place a strain on the discretionary amount, which means more money will NOT be spent reducing credit card balances.

An increase in default rates plus a lack of credit card debt reduction equals lower credit scores.  Why?  Because anything that doesn’t cause your scores to increase can and will likely cause your scores to decrease.  Think about it.  Can this in any way help to improve the credit scores of Illinois residents?  I think not.

That’s not good news especially because Illinois residents currently boast a healthy average FICO score of 699.  As lenders maintain more difficult underwriting standards the impending drop in scores could mean more expensive credit and insurance for Illinois residents.