If you’re like me at all, then life happened and you might need to deal with debt issues. As you probably may have noticed, debt problems often go hand in hand with a low credit score, primarily because there may have been times in which you couldn’t pay anything and had to rely on loans to continue living. When things start looking up again, you have to start rebuilding your financial life.
A big obstacle that many people deal with is figuring out how to deal with their financial outlook. Should you pay down debt, or should you fix your credit score? Well, if you actually look at the facts, both actions go hand in hand – but only in one way.
Paying Down Debt Increases Credit Score
About 30% of your credit score is based on your debt-to-limit ratio. Basically, what this score is measuring is how much of the potential amount of money you can borrow is still owed. If you’re smart and decide to pay down credit card debt, your credit score will increase naturally. Additionally, 35% of your credit score is also based on on time payments, which means that if you pay your bills on time every month, you also will begin to see a boost in your credit score score.
Professional Credit Repair: What To Know
Many people who are in debt will often pay off a professional credit repair company like ScoreCure to legally dispute bad marks on their credit report before they even begin getting their debt in order. This isn’t a great idea, simply because it’s the equivalent of shooting yourself in the foot. Credit repair doesn’t absolve you from debt, which means your debt problem will only get worse.
While getting some bad marks can improve your credit score, the truth is that it will likely not last long if you’re still getting deeper and deeper in debt. Should a collections company sell your debt to another company, that mark will likely reappear from another source within a month. This is problematic, since it typically takes up to 6 months to see results from professional credit repair groups, and that means you will have to keep paying in order to keep that credit score clean. (It’s also worth noting that not all score marks can be removed!)
The Bottom Line
If you can, start paying down debt first, then worry about tidying up your credit score. Since you will be on good terms with creditors, you will have less chances of your bad marks reappearing, and you will also be able to improve your score knowing that it won’t be flushed down the toilet later on.