You hear about credit scores all the time, but what’s all the fuss about? Many people may not understand what a credit score really means, and what factors into how your score is decided. Credit scores are important and can determine a lot of things like how high your interest rates for borrowing are, and it lets lenders determine how risky it is letting you borrow money. Your credit score can apply to your credit cards, mortgage payments, and car payments. However, having a bad credit score is not the end of the world. There are always ways to start repaying your debt, including debt management strategies and bankruptcy. Keep reading to learn more about credit scores and what to do if your credit score is spiraling lower and lower.
What Determines Your Credit Score
- What is your repayment history? How diligent are you at repaying the debt that you borrow? The more late payments you have on your record, or if you fail to make them at all, the lower your credit score will be.
- How much total debt do you have? The higher amount of debt you have taken out and haven’t repaid, compared to the average borrower, the more likely a lender will think you are a risky borrower. Comparing debts on multiple types of loans like mortgages and auto payments will help determine if you can manage multiple debts appropriately and improve your credit score.
- How long is your history and how does it look? The longer you have been borrowing the better, as long as you haven’t been making multiple late payments, or experienced foreclosures and bankruptcies. If you have experienced foreclosure or bankruptcy, there are still options for you.
Help Your Credit Score Before It’s too Late
Creditors are looking to give the best interest rates to people who demonstrate they can make steady payments over a sustained period of time, and have multiple successful loan payoffs. However, if you have serious debt problems and are struggling to pay them off, there is still hope for you. Often times, having a foreclosure or declaring bankruptcy can be the push-start you need to start gaining a positive credit score. Although bankruptcy will stay on your credit score for years, continuing to pile on debt is an even worse strategy. Washington D.C. bankruptcy attorney Kevin D. Judd is experienced in providing complex debt solutions.