Will Paying My Debt Help My Credit Score?
We’re raised on a few simple rules: Never talk to strangers. Eat your vegetables. Pay your debts. Nowadays though, we have strangers driving us around in random Honda Civics all over the city and every other week lettuce contains a new strain of Ebola. And as for paying our bills? Often, it’s easier said than done. When it comes to credit cards, the system was created in a manner that promotes running large balances that take astronomical amounts of time and money to pay back. For a great history of the credit industry, click here. Often, this system leads to a default on one or more debts. Once the impact is made, does the golden rule “pay your debts” apply? Many financial counseling involves paying debts off as quickly as possible; however, is this truly going to positively affect a credit score? It seems according to the credit bureaus, although counter-intuitive, no.
According to FICO.com, the impact occurs upon the default of the loan. So accordingly, payment doesn’t stop its impact on your credit score. Removal of the loan through a dispute may actually be a better solution; however, if the debt is accurate, this will inevitably backfire. Once the debt is paid off, it may give rise to potential increases; however, the actual damages have been done to your score. According to Experian, it too advises that the negative credit mark affects your score upon impact. That means cleaning up after it isn’t guaranteed to improve the score. It may reduce the total amount of debt eventually and lead to a better score; however, their best advice is to keep the accounts current in the first place. The recovery therefore is slow and in the meantime, detrimentally affects the credit every month.
Also be aware that all four of the following have their own metric and release their own credit scores. Here are links to each of their websites:
This makes the entire process a bit unruly. What this means is that the impact of paying a bill may be positive with one bureau; however, have no impact on the score of another bureau. This means when searching for that car or that home, you never know which bureau or which score a lender may see. In the meantime, a lot of money may be poured into a debt for very little impact on your score. The risk of losing so much money may be outweighed with quicker, more direct solutions.
Get a Free Evaluation with SLF today. Text “HELP” to (312) 620-6499
It’s difficult to navigate debt and it takes an experienced hand to help guide you through those waters. Our financial crisis managers at The Shimotake Law Firm, LLC have guided hundreds of clients through the murky waters of debt and can help you too get to some financial stability. Feel free to call SLF today or simply text “HELP” to (312) 620-6499. We’re Here to Help!