Why are people so focused on credit scores these days?

Every time I go online, I see another article with tips or strategies or warnings about knowing your credit score.

For many people, it's a lot like staring at your gas gauge when driving your car. If you've got plenty of gas, you don't need to keep looking at how much gas you have. Just focus on the road, and enjoy the ride. If you're running low, you know you need to stop soon for gas, but no big deal. But, if you're about to run out of gas, forget about the gas gauge and find the nearest gas station ASAP!

The same is true for credit scores - if you've got lots of money and you don't use your credit cards that often, then you really don't have much reason to look at your credit score. Instead, keep doing what you are doing! You must have a good sense about managing your money. And if you use your credit cards but pay them off every month, just make sure they all get paid on time and you don't miss any payments by accident.

But if you're having trouble paying your bills, and you're losing sleep over debt, then "good credit" is a false hope and you need to get your butt in gear and find a way to pay off your debt! Because you can't really live with too much debt and good credit at the same time, regardless of your credit score. So spend your time on finding ways to fix your money problems (make more, spend less - you get the idea) and NOT worrying about your credit score.

It drives me nuts when people say "I'm drowning in debt but I don't want to get help because it might ruin my perfect credit." Are you serious? You have too much debt, but won't get help because you want to save your credit score? Sorry, but you've got this all backwards.

OK, here are 3 good reasons why you should totally ignore your credit score when you're struggling with debt:

1) Credit scores are used for borrowing money. And if you've got a bunch of debt then you probably shouldn't be borrowing any money in the first place (and that includes credit cards, retail financing deals like 12 months no interest, store credit cards - not just loans). You should be working on paying down your debt (because too much debt lowers your credit score) and paying your bills on time (because paying late lowers your credit score). What is a good credit score? Here's a good explanation to help you understand your credit score.

2) Holding onto "good credit" is meaningless if you're trying to pay off debt. Even if you think your credit is great, and you've always paid on time, if you owe too much then your credit is not as good as you think it is! So given the choice between getting out of debt or keeping your "good credit" you absolutely should focus on getting out of debt. Unless you're in big business like Donald Trump, there is no such think as good credit card debt. Especially if your interest rates are above 15%! Hey, you can worry about your credit later...

3) Despite what "the experts" say you CAN fix your credit. I know. Because I did it. It does take some time, and some effort. But it can be done. And I'm SOOO glad I didn't wait any longer by holding onto the idea that I didn't want to hurt my credit. Because in the end, I saved much more money by getting out debt. If you're one of those people who can't pay your bills but won't get help because of the credit score impact, do yourself a favor and get rid of your debt first. Fixing your credit is much easier. And nobody loses sleep over a credit score!

Let me put it to you in real simple terms:

Debt sucks!

- First of all, it sucks to lose sleep over debt.

- And, the more debt you have the faster it sucks money out of your bank account or wallet, because of all the interest and fees.

So if you're dealing with too much credit card debt, then STOP watching all the ads for free credit reports, and STOP reading all the articles telling you how important it is to know your credit score.

And focus all your energy towards paying down your debt.

Do you agree? Or do you think I'm dead wrong? Let me know your thoughts below.

When your credit score drops below a certain level you will find that more and more of your usual lending streams will be closed off to you, credit card limits will be reduced and credit will become more and more difficult to obtain. The only way to turn things around at this point is to take the necessary steps to repair your credit rating, but is it ever a wise move to pay a credit repair company to do this for you?

Credit repair is something that you can undertake by yourself but it can be a painstaking process, particularly if you have a number of creditors or if your debts have been passed onto various debt collection agencies.

There are a lot of companies around that will take on all of the work involved in repairing your credit score and, if you choose a reputable company to do this for you, this can save a lot of time and give you the piece of mind that a thorough job is being done. The major downside is that this will cost somewhere between $500 and $1500, a lot of money to pay out when you are already in a parlous financial position.

Moreover, although credit repair companies will do a lot of the leg work, it is still down to you to do the ground work, i.e. compiling a list of your debts and creditors, and this can be the most time consuming part of the process, particularly if your debts have been passed on to third parties.

It’s also worth bearing in mind that, whilst there are a lot of reputable companies offering a credit repair service, there are those out there that will happily take your money and then take their time, which is of no use to you as you’ll want to see an improvement in your credit score as soon as possible.

This leads to another problem with paid for credit repair services, they very rarely guarantee to repair your credit score and instead will caveat any agreements so they cannot be held responsible should they fail to improve your credit rating.

So if you haven’t the means to, or simply don’t want to, pay a credit repair service to improve your credit score then what steps should you take to try and repair your own credit rating?

The first thing to consider is how you actually ended up with a poor credit rating and examine the factors that can have a negative impact ons your credit score. Your credit score can be adversely affected by any of the following:

• Falling behind on mortgage, loan or finance repayments or making late payments to credit card and utility companies.
• Being close to the credit limit allowed on your credit cards or overdraft.
• Having no previous credit history or a short credit history.
• Applying for a multiple credit cards, loans or overdrafts in a short space of time.
• Not having enough different credit lines, for example, installment loans (fixed payments such as car finance) and revolving loans (unsecured borrowing such as credit cards).
• Being bankrupt.

Once you know where you were going wrong, the next step is to prepare an income and expenditure sheet to cover all of your financial ins and outs. This should include everything from mortgage and rent payments, to utility bills, cell phone bills and the current payment requirements on any loans or credit cards you have. If done properly, this will highlight just how much disposable income you have at the end of each month and give you an idea of whether or not you can meet the demands of your creditors.

If you find that you cannot at least meet the minimum demands of your creditors then it is vital that you contact them and discuss the options regarding a compromise on your repayments. It may be that you come to a temporary agreement whereby you pay a nominal fee each month to give yourself a bit of breathing space to sort out the best solution to paying off the debts. Whilst an agreement like this doesn’t help to actually pay off any of the debt, it will ensure that you do not fall behind on payments and damage your credit score even further.

One way forward may be to take out a debt consolidation loan as, although it may seem like madness to take on more credit, it is far easier to manage one monthly payment to one creditor rather than servicing the debts of several other creditors. Furthermore, in consolidating debts, particularly credit card debts, in one loan, then you may well save money on interest payments.

Another idea could be to transfer any balances you may have on to interest free balance transfer credit cards. Again, whilst taking on another credit card may not seem like the best idea, this will massively cut down your outgoings as you’re not paying any interest and will also ensure that you are paying off your actual debt and not simply lining the lender’s pockets through interest payments.

When you have a handle on your financial situation it is time to start rebuilding your credit rating and there are numerous ways in which you can do this. One of the best ways to do this is to explore any credit avenues that you may have previously ignored such as cell phone contracts, prepaid credit cards or car finance.

It may also be worthwhile to use an existing credit card to pay for everyday expenses such as petrol and grocery shopping as this is a straightforward way to keep a regularly updated credit file and improve your credit score month on month. But, to get any benefit from this, it is vital that you pay off the balance of your card in full at the end of each month so as not to incur interest fees and fall further into debt.

Overall, it is probably best to try and undertake credit repair yourself as, if you are in a position whereby you have a bad credit score then it’s unlikely that you will be in a position to pay anywhere up to $1500 to repair your credit rating. However, if you simply cannot get yourself in a position to go it alone and require an external credit repair service, it is vital that you choose a reputable company that have your interest, and not just your money, in mind.

This article was written by Les Roberts, credit journalist at Moneysupermarket.com.