One of the reasons that people end up with poor credit scores is that they don’t understand how credit or credit ratings work. They are constantly bombarded with myths concerning debt management, many of which are untrue. Because of this, they either manage their debt incorrectly, or they simply give up and don’t do anything about it.
Once you understand that some of the information surrounding debt management is false, it is much easier to manage your debt correctly and to make decisions about things like bankruptcy and hiring a debt management lawyer.
Things Don’t Just Fall Off Your Credit Report
Consumers often mistakenly believe that if they simply wait long enough, their debts will go away. They stop making their payments and hope that the debt will fall off the report eventually. In a way, this is true. However, it is important to understand that this status may only be temporary.
When you don’t take action on your account, it could “fall off” the credit report after a number of years. However, creditors are constantly monitoring your report. When they see significant changes, they may contact you again, which means that the debt could end up back on your report. Simply ignoring debt and hoping it will disappear is not a good way to manage your debt.
Closed Accounts Aren’t Always a Good Idea
It is good to pay off your open accounts, but it’s not always the best idea to completely close them afterward. If you are making regular payments and you make a final payment that closes the account, it looks good. You just need to make sure you still have open accounts that you are making payments on. Plus, the older your accounts, the better your credit. Your credit score could suffer if you only have new credit accounts.
Sometimes you can pay an account off for a lesser amount based on an agreement with the creditor. If you can’t continue to manage your account because of fees or other expenses, it might be best to close the account.
Just make sure that the creditor lists it as a closed account rather than one that is charged-off. Charged-off accounts mean that you did not pay the full amount that you borrowed, and the company simply wrote off the balance. Click here for more information about Chapter 7 bankruptcy.
Managing Your Accounts Responsibly Matters Most
Debt management is about making regular payments on time and managing your credit responsibly. Creditors are not as concerned with whether your accounts are paid in full, so much as whether you are able to regularly maintain your open accounts. If you need more information about debt management, call (813) 940-5120 for a free initial consultation.
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