Personal responsibility is a vital component in credit health, but it isn’t the only piece of the puzzle. Individual livelihood hinges on the state of our nation’s economy. Income level, borrowing and long-term stability are just a few of the factors that are defined by a fluctuating market. Read on to learn how the economy impacts your personal credit and how to control its influence.

In Econ 101, we learn that the economic health affects:

  • Employment rates. The national unemployment rate was 4.7 percent in May 2016, a marked improvement from 5.3 percent the year before. Growth, trade and innovation are all governing forces behind a strong workforce. When these forces stall, the economy stalls with them.
  • Federal interest rates. The Federal Reserve is responsible for setting national interest rates for bank-to-bank lending; that is, the rate financial institutions charge one another for lending. When rates increase, banks offset their costs by raising interest rates on mortgages and other personal loans. Although the Fed rate increase is a sign of economic growth, higher rates can prevent would-be borrowers from entering the housing market.


  • Inflation rates. The average U.S. inflation rate is 3.22% per year, but a rise in costs doesn’t guarantee a rise in personal income. According to Pew Research Center analysis, “…after adjusting for inflation, today’s average hourly wage has just about the same purchasing power as it did in 1979.” Rising costs and stalled wages limit consumers’ ability to stimulate the economy with their purchases and increases the risk of consumer debt.

How to Respond

As individual consumers, we have little control over market trends and job growth, but there are ways to anticipate and minimize the economy’s effect on personal credit:

  • Become indispensable. Job growth and retention relies on one thing: value. As a hard-working employee, your boss will consider you indispensable and fight for you if the company requires cutbacks. They will also be more inclined to offer annual raises and bonuses. Strengthen your presence by:
    • Distinguishing yourself. Finding your niche is valuable for employer and employee alike. Consider needs that may be neglected in your office and become the person who fills them.
    • Helping others. The best employees are ones who are willing to help the team and share the glory. Establish yourself as an asset by assisting others when necessary.
    • Following the trends. Some professions remain in high demand regardless of economic climate. Compare your professional skills to the data found in the Bureau of Labor Statistics’ Occupational Outlook Handbook.
  • Say goodbye to variable interest rates. Worrying about economic shifts is easier when you don’t have variable interest in the mix. High credit card balances can hurt your score by increasing your credit utilization ratio and compounding into unmanageable burdens. Minimize risk by paying your balances in full each month.
  • Reshape your spending habits. In addition to curbing interest payments, it’s essential to curb spending in every area of life. Establishing a conservative budget and emergency fund is the best way to anticipate and respond to economic shifts. Download our free template and talk to a professional about how to best manage your funds.
  • Search for sustainability. Responding to economic shifts is easier when your life is full of sustainable habits. Look for savings related to:
    • Energy costs. U.S. trade directly affects the cost of fuel and energy, and it’s wise to limit your carbon footprint. Find an affordable vehicle with a low fuel economy and track your utility use. Saving as little as 15% each month on these expenses will help you weather a fluctuating market.
    • Long-term use. Whether it’s furniture, housing or even education, distributing funds wisely means considering long-term use. Opt for quality that has the ability to withstand several years of economic change.

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