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 @KELLIGRANT 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. After an 8.7% Social Security cost-of-living adjustment for 2023, next year's increase may not be as large Older generations are spending more, thanks to a record Social Security cost-of-living adjustment for 2023. But benefits may not increase as much next year. 84% of recent first-time home sellers have regrets. Here are 4 mistakes to avoid A recent survey found 9 in 10 recent first-time home sellers feel they could have sold their homes for more money. Here's where they think they went wrong. College hopefuls have a new ultimate dream school — and it's not Harvard, Princeton or Yale As National College Decision Day approaches, most of the colleges at the top of students' wish lists are among the most selective and most expensive. Don't believe these 5 tax myths. Here's what you need to know before you file this year's return Know the facts when you're filing your taxes this season. Here's a look at the truth behind some common tax myths. 41% of adults are preparing for a recession. It's time to stress-test your income, advisors say Recent bank woes have brought recession fears into clearer focus, experts say. If you're worried about a downturn, advisors say these three steps can help. The last chance for some retirees to avoid a 25% tax penalty is April 1 If you turned 72 in 2022, the last chance for your first required minimum distribution is April 1 or you may face a 25% tax penalty. Why our brains are hard-wired for bank runs like those that toppled SVB, Signature The bank run that led SVB to fail was a rational flight to safety, behavioral finance experts said. It shows how human psychology can inject financial risk. Key banking crisis lesson: 'The first line of defense should always be cash,' advisor says The collapse of Silicon Valley Bank and the banking crisis provide "a great case study" for clients, advisor says. Here's what investors need to know. 5 key things to know when you create a will and make other end-of-life plans Your estate plan doesn't need to be complicated, experts say, but it does need to be done properly so that your wishes will be carried out. CONTRIBUTORS Sharon Epperson @sharon_epperson Josh Brown @ReformedBroker Unsubscribe Manage Newsletters Terms of Service Join the CNBC Panel   Digital Products Feedback Privacy Policy CNBC Events   © 2023 CNBC LLC. All rights reserved. A property of NBCUniversal. 900 Sylvan Avenue, Englewood Cliffs, NJ 07632 Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes and Market Data and Analysis. Data also provided by THOMSON REUTERS