Don't Let Your Credit Hold You Back

According to FICO.com the average credit score now is between 690 and 700.  Average credit scores are increasing because consumers have begun to pay down their debts. However, many Americans are still in debt, some haven’t even begun making payments or can barely afford to make the minimum monthly payments.  Fifty percent of Americans spend more than they earn. 

Being in debt affects your credit score either negatively or positively.  If you pay your bills on time you score will increase, if you don’t it decreases.  Seventy-nine percent of all credit reports contain at least one error and 75% of all credit reports contain one major error.  According to a 2006 Consumer Action study, 27% of Americans had never checked their credit. Another 33 million had credit reports that do not contain enough information to generate a credit score. Twenty-four million Americans had no credit file.  According to a TrueCredit survey 90% of Americans don’t know their credit score.  

Due to the recession, 720 is the new 680.  Banks and lenders are now stricter with criteria for approval of a credit card or loan. If you have bad credit you will probably be denied. However, there are some companies that may give approval but it will be at a high cost.  You will have to pay higher interest rates and possibly upfront fees. 

Bad credit can hold you back from getting approval for a student loan, mortgage loan, business loan, or personal loans.  Bad credit affects:  getting hired, interest rate, terms and conditions, getting capital to start a business, insurance rates, approval for renting usually requires first month or first and last month deposit, ability to generate wealth, products and services offered, ability to get access to programs tailored to those with good credit, relationships and credibility with service providers and employers.

Bad credit and being in debt can also cause you to lose focus, cause anger, anxiety, stress and health issues.  Debt can affect relationships with friends, family or your spouse.  One of the biggest causes of divorce is due to finances.  Paying down debt can eliminate those negative feelings and improve your relationships as well as your credit score.

Using credit is a balancing act and most Americans don’t balance it very well which is evidenced in the amount of debt owed by Americans and their low credit scores.  If is crucial that you pay back any debt owed starting with delinquent accounts, especially if you plan on applying for credit in the future.  Paying down debt also prevents legal action taken against you for an outstanding debt.

Pay down debt as soon as possible to help increase your credit score, increase your savings account balance, reduce stress, improve relationships with creditors, and improve your financial future. Don’t let your credit hold you back.