subject: Debt Settlement And Fico Scores - Be On Guard For Your Debt Relief! [print this page] Have you ever wondered about the specific impact on your FICO score if you made a late credit card payment, or maxed out your credit card? Find out how your FICO score responds to certain credit mistakes.
According to the Fair Isaac Company your debt to credit limit ratio accounts for more than 30% of the score, so it becomes completely essential to get rid of your debt first when you are attempting to improve your credit score.
Also remember as your credit report is only a snapshot and is never a permanent record, it is possible to recover and improve your credit score over time. Everyone enjoys a second chance!
For years, consumers have had little knowledge about how these and other negative actions would affect their credit scores. FICO is a developer of the most widely used credit score. We know little about the number of points will be lost from some of the most common mistakes.
FICO tells us how many points could be lost if credit mistakes were made. While these point loss scenarios are hypothetical, they do give us some important details about FICO scores. The process of FICO score assignation is a complex and changing field of finance. FICO scores take into heavy consideration any overdue payments when assessing your overall credit risk potential. It is because a late payment is decided to be an indicator of the borrower who does not take their debt payments seriously or responsibly.
Open accounts you have failed to make payment on are disastrous for your credit score. If in case you have fallen behind on paying your bills, or have several charge-offs listed on your credit file, you might be considering debt settlement as a solution to your credit problems. While it's true that debt settlement can allow you to to pay off debts, your credit score might be negatively impacted, depending upon how it is listed on your report.
If the financial institutions are really alarmed about you and your credit score then why would they extend your credit line in your current credit card so you can charge more if they know that this will likely reduce your score? So do you think they really care? Possibly not!
Many people turn to debt settlement while attempting to qualify for certain loans that require all outstanding debts to be paid. Debt settlement can be negotiated at any point during the process, but it's most common when you are several months late or have charge-offs that you have to repay.
Warning, in the short term, debt settlement will certainly cause your FICO score to drop. Therefore, it is best to adopt a practical approach and seek advise first with a professional company and learn exactly what the smartest options are in your situation. Debt consolidation may be another answer.
The debt relief company should be saving you at least 40% or more of your debt including fees and paying your creditors.
