Credit constraints can potentially be an amplification and propagation mechanism that transforms the shocks hitting the economy into the observed business cycle fluctuations. This article demonstrates, in contrast to previous studies, that the transmission mechanism through credit constraints is quantitatively important. In the context of a dynamic stochastic general equilibrium model with heterogeneous agents and credit constraints, we obtain two key findings essential for this financial mechanism to work. First, we identify shocks that impact directly on asset prices and thus trigger strong amplification effects. Second, allowing firms to be constrained by the value of their collateral assets is crucial to generate ripple effects on the persistent comovements between the prices of collateral assets and aggregate quantities.