Forbes reported this week that Sprint shares plummeted after one analyst gave the company a less-than-rosy financial rating and noted that he believed it has a 50 percent chance of filing for Chapter 11 bankruptcy protection.

But here’s the kicker: Sprint’s financial fate is closely tied to the predictions and analyses issued about its future. After an analyst downgraded Sprint’s stock status, its share price dropped from $2.50 to $1.75, illustrating how quickly investor expectations can become reality.

Of course, Sprint is facing legitimate challenges to its business model, and would likely have suffered a decrease in its stock price eventually, even without the analyst’s comments. But the plummeting stock price won’t do the company any favors as it tries to get back on its feet. Here’s how your finances are more or less the same.

The Predictive Power of Your Credit Rating

The individual equivalent of Sprint’s public rating is the credit report and credit score. When you have a low credit score…

• You’re seen as a “bad risk” by lenders. Because of this, they are less willing to extend you loans. Those loans you are able to secure will come with higher interest rates than they would if you were deemed a “good risk.”
• You pay more to borrow. Over the course of the repayment of your loans (which may come in the form of a credit card, a mortgage, a car loan, etc.), you will end up paying more in interest than someone who had stronger credit than you.
• You have less money. More of your money goes toward loan payments and less of it goes toward savings and paying down other debts. The more debt you have and the less you have saved, the more your credit score will suffer, meaning that it will continue to be difficult for you to get attractive loans.

Of course, the opposite is also true: if you secure a good credit rating, you will qualify for loans with lower interest rates, leaving more of your money available to pay down debts, save, and generally improve your credit worthiness.

Break the Debt Cycle & Build Stronger Credit

There’s no fast way to build stronger credit. Negative credit actions (including foreclosures and bankruptcy filings) remain on your credit report until their statutes of limitations expire.

But while the process isn’t fast, it is fairly simple. The easiest way to improve your credit rating is to ensure that you pay all your bills on time. Set up a plan for paying down debt, save money, and eventually the positive actions on your credit report will start outweighing the negative ones.

An ABC news interview with former federal bankruptcy judge Arthur J. Gonzalez, who oversaw the bankruptcy case of Chrysler, sheds new light on the role bankruptcy played for the big automaker. According to Gonzalez, the bankruptcy filing was essential to Chrysler’s economic recovery, and without it, the automaker would have not been able to continue operations.

Here’s a look at what affect that assessment might have.

Bankruptcy: A Hot Election Topic

One potential effect of Gonzalez’s comments is that they’ll impact the rhetoric Republican presidential candidates are hurtling on the campaign trail. Here’s why:

• Under Presidents Bush and Obama, Chrysler received $12.5 billion in federal loans. At present, Chrysler has repaid all but $1.3 billion of those taxpayer dollars.
• In addition to bailout money from the federal government, Chrysler filed for Chapter 11 bankruptcy protection to help ease the unmanageable debt burdens it had connected to pension plans for the auto workers’ union, among other expenses.
• Chrysler has, since filing its bankruptcy case, emerged from the court’s protection. Last quarter, the car company posted earnings of $225 million, indicating that it is once again profitable.
• Republican presidential candidates, who generally argue for smaller government and less government intervention in the private sector, have largely criticized the federal dollars that were loaned to Chrysler and the other automakers. On the campaign trail, many candidates have noted that the car companies should have gone through bankruptcy without help from the federal government.
• In his interview with ABC news, however, Gonzalez made clear that Chrysler had no funding alternatives to the federal government at the time that it received its cash infusion. In other words, no other lenders were willing to extend Chrysler credit to help it get back on its feet.

Today, Chrysler and the other Big Three automakers are once again profitable. If we are to believe Gonzalez, that profitability is thanks in large part to the bailout money provided by the federal government.

Because the carmakers are once again selling vehicles and turning a profit, the millions of Americans they employ still have their jobs. While this may seem like a boon for President Obama, under whom some of the bailout funds were dispersed, it will likely prove difficult to convince voters that any action “prevented” the loss of a job.

Much more dramatic (and visible) are the actions that directly eliminate or directly restore jobs.

Of course, Gonzalez’s claim that Chrysler would have been forced to liquidate (i.e. sell off its assets and close up shop) without help from Uncle Sam will likely be questioned, ridiculed, and dismissed by those who disagreed with the bailouts, even as it is heralded as gospel by those who supported them.