Credit Scores: What Your Credit Card Companies Don't Want You To Know
Most people are under the impression that if they pay their credit card payments on time their credit scores are excellent. It is true that a payment history of on-time payments does positively affect your credit scores however most are surprised to find that their credit scores are actually quite low or continually decreasing. This is because your creditors fail to mention that nearly 33% of your credit rating is determined by the amount of debt you owe. If your credit cards are near or over the limit, chances are your credit scores are negatively affected.
Lenders often refer to this as your (DTI) debt - to - income ratio: how much money you have coming in (your salary) compared to how much you have going out (mortgage, credit card bills, auto loans, etc.). The higher the balances are on your credit cards the higher your DTI! This means you begin seeing your credit score drop and lenders become aware that you are now living above your means!
When an attorney settles an account it is reported to the credit bureaus. Compared to a bankruptcy or outstanding collection, settled accounts are looked on in a much favorable manor because these high interest compounding balances have been paid, collected and are no longer open.
During the beginning of our program, some clients may notice that their credit ratings have gone down slightly. Keep in mind once the debt has been settled and cleared up, your rating will then begin to improve. Your credit score is quite similar to that of an elevator. Your credit score is constantly going up and down based on your current financial situation. Credit card companies want you to keep paying those minimum monthly payments for years, keeping you at the same floor or situation you are in right now. They are never going to encourage you to break the cycle and sacrifice your credit temporarily so that one day you can become debt free and have a credit rating you can be proud of.
What would you rather have, a 650 credit score with credit card debt and bills that will take you decades to pay off or an 800 credit score once you have eliminated your credit card debt and taken a fresh new start towards your financial freedom?
We hope you choose to end the cycle of hidden lies, worry and stress. You no longer have to work at this alone. We are here to work hand - in - hand to see that you accomplish your goals and become debt free!
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