While the discussion in Washington is raging for tax cuts, economists are warning that the real danger is much closer to you – your creditworthiness.
While Congress remains paralyzed with this “One Big Beautiful Bill Act” debate of the decade, a more serious issue is brewing, which is hidden from the public eye. The superlative height US national debt is anticipated to attain in the event of the new laws’ approval, and that is, by more than $3 trillion, is not just a domestic issue — it is also most likely that the next step would be the decline in consumer credit scores through the backdoor and the new method by which the banks will assess the credit risk of their clients will come into existence.
Rising Debt, Rising Rates — But What About Rising Risk?
First, we know that most Americans are familiar with the fact that the higher debt the country incurs the higher the interest rates. It is not, however, known that the credit industry is making the less noticeable change which can possibly be the connecting link between the reliability of a borrower and the debt-ridden economy’s perils.
There are claims that when the US keeps increasing its debt-to-GDP rate — an action that is expected to breach the 136% mark by 2025 under the Republican scenario — financial institutions not only will likely shift focus to risk-through-volatility economy but they may go to the extent of removing the strongest financial habits from the equation.
“Creditworthiness was and will be a matter of individual decisions by persons,” said Marianne Fields, a risk analyst at USFinTech Analytics. “Nevertheless, contextual factors now seem to have made their way into the personal credit scores.”
The Impact of the First Domino: Tracing the Route via Treasury Yields to Credit Models
How this process operates is the following: The growing U.S. debt puts upward pressure on Treasury yields and thus indirectly also influences the interest rates charged on the mortgages, auto, and credit card loans, which are linked to these yields. When the rates go up, payment arrears frequently become the result.
Rising delinquency levels might lead to lenders’ proactive actions to adjust their internal credit rating models — preferring those macro-risk factors more and more while reducing the approval thresholds. It could mean that a credit score of 720 does not ensure the same access or terms as it used to.
“The person who in 2026 applies for the mortgage, may have a score that is high enough, but the environment won’t be,” said Fields. “Lenders will be very cautious.”
The Power of Trust and Behavior: The Key to a Stable Economy
Financial behavior results from the way people receive and interpret financial information. Increased costs, uncertain interest rates, and consumer bewilderment over national policies could trigger a series of bad financial choices — in many cases these are irrational ones.
“Financial insecurity, even if it is fictitious, on the consumer’s side leads to impulsive borrowing — credit cards, personal loans, quick refinancing,” said Dr. Alan Monroe, a behavioral economist. “And that’s the tripping point. You take the rates up by borrowing constraints while you lower your score as long as you are a good borrower.”
The credit market must be stable and exert an element of trust. If national debt is turning into a headline risk, that trust doesn’t erode only between governments and investors, but also between borrowers and consumers.
Is Your FICO Possible To Be the Next on the Hit List?
It is said that credit scoring agencies could make a revolution in the way national debt-related dangers are represented by the launch of fancy new proprietary models. Although neither the standard FICO nor VantageScore metrics have publically announced such actions, the point is that non-traditional lenders and vendors utilizing AI and behavioral data as the main sources have already been on that way.
“Some of the apps have started to add the economic data into their risk model,” explained Monroe. “The higher the economic uncertainty is, the less these apps rely on the traditional scores.”
This might be indicative of a quiet but profound transition: A future where credit scores do not represent only your own behavior but rather the behavior of your country as well.
What Actions Are Fit for Consumers Now?
Though the control of Congress is beyond the reach of the U.S. public, financial experts are of the opinion that the consumers still have the following options:
- Commit to long-term interest rates now, before the rates go up again
- Paying off revolving debts is a good way to uplift the economy’s self-sufficiency
- Be on the lookout for further policy discussions since it’s likely that macroeconomic changes will have an impact on individual financial tools.
“It’s not about politics,” Monroe pointed out. “It’s about realizing the fact that the national debt is not anything distant. It’s on the doorstep of your wallet — and who knows, it might influence your FICO score as well.”
