With the election weeks away, one key battleground for the candidates isn’t a swing state – it’s in your back pocket. Increasingly when asked how they are choosing a candidate, voters answer with their checkbooks. Why? Because all issues ultimately boil down to one thing: cold hard cash. The economy is still in the dumper, but looking forward, even those of us who have been able to escape home repossession, unemployment or other financial hardships recognize the difficulty these issues pose for our country. What’s more, the state of the economy has an impact directly on your credit rating.
Understand Credit Ratings
First, let’s be sure you understand what a credit rating is: a magic number that determines how easily you can borrow money and how cheap the repayments are. This number is based on many things – primarily your own history of borrowing and repayment, mixed with variables like types credit you have and frequency of borrowing. None of this has anything to do with anyone but you – it is your credit, your payment history and your responsibility; if you don’t pay bills on time, the resulting credit score is your problem.
Having said that, there are a lot of political hijinks that have an impact on the affordability of credit in the first place – where interest rates are high and lenders have limited incentives, people find it harder to borrow. Difficulties in borrowing lead to difficulties in spreading money around – which makes for a stagnant economy where no one prospers.
National Ratings, Personal Consequences
Given the downgrade of the US credit rating by Standard & Poor’s last year, there were many negative things in the works – some happened, others still loom. The upcoming election poses a clear opportunity for the economy – depending on who is in the Chief’s chair, the other two key agencies Moody’s and Fitch, may change their current AAA ‘negative’ ratings for better or worse. In a July statement to Fox news, Fitch confirmed their evaluation wouldn’t conclude until late 2013 – giving the winner of November’s election ample opportunity to make effective arguments and strides toward solutions.
The thing to remember is this: if the government pays more to borrow money, so do you. If you pay more, payments are harder to make, which means if your income is close to the threshold for “acceptable risk”, credit is harder to obtain. This means less money moving around the system for everyone. What will the candidates do about it?
This involves: spending money on training programs for the workforce; spending money on projects to create more jobs and providing incentives for companies that ‘return jobs’ to the USA. Great. You’ll notice it involves spending money to get things rolling – where will it come from? Higher taxes on businesses that outsource, higher taxes on higher earners and various cuts in military, medicare, and other spending. The result advertised is a $4 trillion dent in the deficit, which should make the international lending community happier, but it involves heavy negotiation in Congress.
This includes: altering tax codes to favor entrepreneurs, job creation, investment and revenue collection; opening new markets for free trade to and increased job creation; improve worker retention, training and re-employment; and, cutting government expenditure by cutting down on the size of government. The bulk of these are strategies that pay for themselves, don’t involve raising taxes and promote a tenant of the Romney campaign: personal responsibility. None of it seems too contentious to get through the legislature.
When you look at the campaign documents from either camp, don’t get mired in the ‘he said / he said’ aspects of each argument. Instead, look at the key words each party is using to try to sway your vote – and consider the impact those words have on your wallet. For Obama, you have spending, higher taxes, and a deficit drop. With Romney, you see investment, trade, and expenditure cuts. These are all words the credit community wants to hear, but getting traction in Congress to agree to the plan is the key. In a statement to CNN, Fitch cited a lack of confidence in Congress enacting “timely fiscal measures” as a likely factor in their decisions going forward.
The markets and indexes need to see an America that is working toward resolutions – not bickering over birth certificates and tax returns – if the nation’s credit ratings are to be salvaged. And saving those credit ratings is the first step toward improving your own. A better credit rating for you means easier access to things you use every day, cheaper access to credit lines and even lower insurance rates. So what you have to ask yourself is this: which candidate is going to get faster traction approving measures in the Congress?
The answer for my wallet is Romney.
This article was written by PR Director Michael Bratton of BestCreditRepairCompanys.com.