“It is much more difficult to unlearn an erroneous supposed truth than it is to learn a new truth”- Herbert Armstrong
Have you noticed there seems to be a constant push in society to maintain a good credit rating?
No one wants to have bad credit or be known as someone who doesn’t pay their bills. However, few realize that maintaining good credit only makes it easier to incur more debt. A credit score has nothing to do with how much money you make or how many assets you own. The score is a direct reflection of your credit lines, the length of time they have been established and the amount available to use, compared to the balance owed.
Banks use a credit score to determine the odds of you being able to pay them back. Obviously a higher score means the odds are good you will pay them back, providing better rates and financing opportunities with little or no verification. While a lower score means a larger risk, having to provide many documents, along with higher interest rates or lower credit limits. The information gathered in an application or job verification is simply their way of improving the odds that you will pay them back. Very few references are called before credit is established, but many receive calls once you are having problems paying the bank back.
Often times in our culture today many become overleveraged in debt due to unforeseen life circumstances, such as job changes or medical problems. When these events occur and we begin to use the “good credit” already established it quickly backfires. Good credit is often confused by a great payment history. However, when carrying abundant debt or payments, most banks don’t want to loan you anymore credit. Although you have never made a late payment over 30 days, the amount of debt owed, combined with the maximum usage of credit lines, and the type of accounts, will begin to decline your score. You may not feel there is a problem while your accounts are still current, but have you ever considered the fact those accounts were not late were due to the ability to borrow on more credit?
Once a credit score starts to decline this indicates to the banks that it is time to change the terms, such as reducing credit limits, raising interest rates or closing accounts. Simply put, credit card companies set this trap which many don’t see coming, while others who are warned, ignore the advice they were given to stay away.
The good thing about a credit score is that it has no memory and time will always heal all the bad marks. I encourage many people to look at “bad credit” as a way to pay off their debt already owed, while holding onto “good credit” only keeps you in debt longer. Worrying about credit when you are deep in debt is like worrying about the couch getting wet when the house is on fire (….you know it is going to get soaked by the firemen…) There will come a day when you can buy a new couch and there will come a day when you can create more debt with credit again.
To gain more insight about debt relief options please visit: http://www.commoncentscreditsolutions.com/page/5/debt-relief-options
