Why Credit Scores Don’t Always Matter For Atlanta Consumers
Could it be that having a good credit score isn't all it's cracked up to be?
A recent story by Forbes.com explores the idea that Americans are so brainwashed to believe we need to achieve the perfect credit score that we're actually making our finances worse. How? By forgoing things like saving for retirement and paying down credit card debt, explain Atlanta bankruptcy attorneys.
Most Americans mistakenly believe that carrying a credit card balance is the best way to boost a credit score. As a result, millions of Americans are paying high interest on credit card balances that will take decades to pay off without help from bankruptcy.
In reality, carrying a balance doesn't help your score. And if that balance is so big that you're living paycheck to paycheck and making the occasional (or frequent) late payment, it's probably damaging your score. Credit bureaus calculate your number based on things like the timeliness of payments, your debt to limit ratio (i.e. the ratio of your balance to your credit card limit - hint: the lower the better) and the length of your credit history.
So why do credit card companies allow so many myths to persist about credit? Simple - because it allows them to make more money. The higher your balance, the more interest you pay out each month. Maybe that's why so many folks are clueless about the effect bankruptcy has on credit.
As we discussed last week, most Americans avoid bankruptcy because they've been led to believe it will lower their score. But for people drowning in debt, bankruptcy may be the only way to improve credit. Yes, bankruptcy may lower your credit score initially after you file. But by eliminating the problems that have been holding back your finances - like high interest, late payments and maxed out credit cards - bankruptcy allows you move forward, ultimately reaching a credit score far higher than you ever could have achieved with too much debt.
Instead of chasing perfect credit, focus on cleaning up your finances - you may find that a good score simply falls into place. And if your debts are unmanageable, bankruptcy can be the most effective way to get them under control. For more information, check out our Video Learning Center or sign up for a free personal debt analysis with one of our Atlanta bankruptcy attorneys.