Credit scores are a useful tool, and certainly have an important role to play in the granting and pricing of loans and credit. But sometimes, getting new credit isn’t really the goal. For people whose primary objective, at least in the short-term, is to pay down debt or even just to get through the month at all, fears about whether some action or another will “hurt” one’s credit score aren’t helpful. It’s unnecessary stress. This kind of thinking can lead people to spend the little money they have on endless interest payments rather than basic needs. Instead, I remind my clients to keep perspective about what a credit score can do, and what it can’t. Good credit can help you get a mortgage, and it can get you a better rate on your credit card, but there’s a lot more to life. Even the best credit score can’t feed your kids.
If you’re struggling just to get by, or you’re working hard to pay off debt, getting well-priced access to credit probably isn’t in high on your list of urgent needs. Sometimes, the smartest short-term decision is to make a clear list of your priorities – as in, #1: food, #2: shelter, #3: clothing – and realize that “improving my credit score” is actually pretty far down that list. It can be a really freeing exercise, especially if you’re living with the burden of heavy debt.
It may mean you have to learn to ignore collectors’ calls, but I also remind my clients that, at least in Ontario, there are limits on what a collector can do. Indeed, collectors like to remind debtors that by not paying the debts in full right away they risk damage to their credit score, but I often remind my clients to ask themselves, “so what?” So what if my already-damaged credit score stays a bit lower than I’d like for a while? Remember, it’s never too late to start re-building your credit, even if you’ve neglected it for a while. Sometimes that’s a good short-term decision.
I certainly understand wanting to have “good” credit, and I know most people really want to pay back whatever they owe. It’s a goal I encourage and applaud. But for people who are currently mired in debt, or living on extremely limited means, it may just be a goal that’ll need to wait.