What happens during a ‘credit crunch’ — and how you can prepare for one

What happens during a 'credit crunch' — and how you can prepare for one  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  VIEW IN BROWSER | SUBSCRIBE WED, MAR 22, 2023 YOUR WEALTH Editor's Note Ongoing concerns about the health of the global banking system may lead to another negative effect for consumers: a credit crunch. Banks tend to tighten their lending standards in tough economic times, and experts think the banking crisis could prompt small and midsize financial institutions to take such steps to prioritize a healthy balance sheet. That "crunch" in lending activity can mean it's harder for consumers and businesses to obtain new loans or lines of credit, and that loans on offer carry higher interest rates or less favorable terms. If you anticipate financing a big purchase in the coming months, it's smart to act now to make sure your creditworthiness is "as attractive as can possibly be the case," Christine Benz, director of personal finance at Morningstar, told reporter Greg Iacurci. Other measures you might take ahead of an economic downturn can help in a credit crunch, too, including beefing up your emergency fund and reducing credit card balances. When you do need to borrow, shop around: Some banks may be more likely to change lending behavior than others. For more advice to help you make smart financial decisions, check out CNBC's Financial Advisor Hub and Personal Finance section. To listen to the latest edition of the PF team's weekly Twitter Space, "This Week, Your Wallet," click here. Kelli Grant, CFP | Deputy Personal Finance Editor

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What happens during a 'credit crunch' — and how you can prepare for one

Banks will likely tighten lending after the collapse of Silicon Valley Bank and Signature Bank, experts said. It may be harder or more costly to get a loan.

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Sharon Epperson @sharon_epperson

Josh Brown @ReformedBroker

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