Overall, we tend to worry a lot about what other think of us \u2013 and there\u2019s no exception when it comes to finances.\u00a0 We often hear from people in serious financial crisis who are more concerned with what the bank thinks about them (via a credit score) than what difficulties and risks their financial problems are posing to their mental health, family-life and even jobs.\u00a0 Here\u2019s why you shouldn\u2019t let your credit score be a measure of how your finances are doing:<\/p>\n
Easy come, easy go:<\/strong>\u00a0 Your credit score is calculated using information contained in your credit report.\u00a0 Essentially a credit score is a moment in time and can change depending on your actions.\u00a0 You\u2019ll gain points for \u2018favourable\u2019 actions, and lose points for actions demonstrating difficulties, such as maxed-out credit.\u00a0 Lenders have their own unique policies and rules that will determine how your credit score affects your credit application.<\/p>\n It\u2019s important to remember that your score is NOT permanent and can change drastically in as little as two years!<\/p>\n Income and assets affect borrowing power<\/strong>:\u00a0 Gauging your financial health by your credit score alone is a poor measure at best.\u00a0 Having a \u201cperfect\u201d credit score doesn\u2019t automatically mean continued access to new credit.\u00a0 If your credit score is at an ideal level for borrowers, but your income or family situation has varied (ie. pay cut, divorce) then you may not be extended further credit on reasonable terms when you most need it.<\/p>\n Postponing seeking professional debt assistance because of the fear that it will damage your credit rating is common, but ask yourself:\u00a0 \u201cCould I actually borrow enough to consolidate all my debts if I needed to?\u201d\u00a0 For many, the answer is no \u2013 meaning that in the grand scheme of things, that credit score isn\u2019t actually doing much (if anything) for you.<\/p>\n Credit Score VS. Budget<\/strong>:\u00a0 Making regular minimum monthly payments on debts will help to keep your overall credit score to stay high \u2013 but that doesn\u2019t really reflect your ability to pay the debt off and become debt-free.<\/p>\n Consider the following scenarios:\u00a0 Person A has what they would consider an ideal credit score, and it\u2019s taken them a long time to achieve that, unfortunately due to some circumstantial changes they\u2019re unable to manage their debt effectively and pay it down in a reasonable amount of time.\u00a0 Their credit score probably doesn\u2019t provide much comfort.\u00a0 Conversely, immediately following a bankruptcy, Person B\u2019s credit score will be poor \u2013 but now they\u2019re debt-free and can start to rebuild because of the \u201creset\u201d the bankruptcy has provided.<\/p>\n The main thing your credit score can\u2019t tell you, is how you\u2019re actually doing financially on a day-to-day basis.\u00a0 If you can\u2019t see being debt-free in the next two years, your budget won\u2019t allow for you to make more than minimum payments on your debts, or you\u2019re consistently relying on credit to meet your living costs (or even borrowing from one account to pay the other) \u2013 those are clear indicators that it\u2019s time to seek a professional plan to deal with your debt.<\/p>\n Ready to talk? \u00a0We\u2019ve been helping BC residents become debt-free since 1990!\u00a0 Contact us<\/a> today to book a free, confidential consultation<\/a> in one of our local offices.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Overall, we tend to worry a lot about what other think of us \u2013 and there\u2019s no exception when it comes to finances.\u00a0 We often hear from people in serious financial crisis who are more concerned with what the bank thinks about them (via a credit score) than what difficulties and risks their financial problems […]<\/p>\n","protected":false},"author":8,"featured_media":6444,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[261],"tags":[38,39,74,37,49,117,120,101,100,50,43,40,42,70,204,35],"class_list":["post-6046","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-debt-free-living","tag-bankruptcy-bc","tag-bankruptcy-trustees","tag-bc-debt","tag-consumer-proposals","tag-credit","tag-credit-counselling","tag-credit-counsellor","tag-credit-report","tag-credit-score","tag-debt","tag-debt-consolidation","tag-debt-consultant","tag-debt-settlement","tag-financial-stress","tag-licensed-insolvency-trustee","tag-sands-associates"],"acf":[],"yoast_head":"\n