With the recent mortgage crisis, Fair Isaac (who makes the popular FICO credit score used by most lenders) will be using a new system for calculating credit scores this year, called FICO 08. Here's an article from the Wall Street Journal that explains the new credit score better:
Basically, if you've only had a few "blips" on your credit report, your score might improve a little. And if you're a "repeat offender" it may go down a little.
But does your credit score really matter if you're trying to get out of debt?
I've heard this statement many times over the years from people struggling with debt: "I want to get out of debt, but I don't want to do anything to hurt my good credit rating."
That's what I used to think, too. Then when I had enough, I just said "screw this, I'll get out of debt first then fix my credit later". Guess what? It worked.
Hey, if you have a lot of debt, and have had any trouble paying your bills in the past, you've already hurt your credit - sorry to tell you. So there's no sense worrying about good credit when you've got too much debt in the first place (and isn't good credit only important when borrowing more money and getting further into debt?)
I know, it's the American way to keep borrowing, keep spending, and keep buying - even when you can't afford something.
And I realize most people have future plans, like buying a house, and don't want bad credit to get in the way.
So, you'll need to decide for yourself:
- Is it more important for you to do whatever it takes (including hurting your credit) to get out of debt?
- Or is it better for you to be safe, and protect your credit while getting out of debt?
UPDATE: I just read this article on FICO scores - it's from a marketing newsletter I read, so you may not enjoy it, but it is eye opening!
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