Your credit reports and credit score will heal and bounce back given time.And this is true no matter what path you take to resolve your debts.Do not let others sell you on the importance of maintaining credit when you cannot maintain payments on the debt you have.
This page will also help to dispel some myths that get regurgitated across the web.
There are far too many misconceptions (and incomplete summaries), about credit reports and the harm that comes from credit counseling, settling debt for less than what you owe, or how bankruptcy will stop you from getting approved for credit.
A common concern you may have when searching for the best way to get out of overwhelming debt is what can happen to your credit score.
What follows will help you understand credit score impacts that relate to the most common and legitimate debt solutions.
This has led to a reduction in lending because more attention is being given to lending criteria other than your Vantage and FICO credit scores.
This means that you’re DTI (Debt to Income ratio), if unhealthy, will prevent you from getting approved for new credit, even if your credit score is excellent.
See the video below to better understand the affect on your credit score by different debt relief solutions, plans, or programs.
Credit reports and credit scores have a utility function for both you and lenders. You use your credit score to get better pricing when accessing credit for consumption.
Another example of the new normal are the increasing changes to credit underwriting standards for home loans that will impact most people. But if you are carrying too high a percentage of monthly debt payments compared to your monthly income, your credit rating has lost its utility function.
The CFPB’s new qualified mortgage rules will now impact your ability to get approved for a new home loan, or refinance an existing loan. You cannot effectively use that excellent rating without first implementing a strategy to pay off debts and bring your DTI in line with the lending standards being used in the credit market you are interested in.
Putting aside the hyper messaging in society about the importance of your credit rating; What do you need your credit rating for right now, or over the course of the next 24 months?