Credit is important. Among other things, having good credit is what enables someone to obtain a mortgage to purchase a house, get a loan to purchase a car, and obtain a credit card to use for the unexpected expense. Now ask yourself this. . . What is more important? Having good credit or putting food on the table? Having good credit or paying for prescriptions? Having good credit or buying clothes for your child?
Is Your Credit Score Really Worth It?
Sometimes individuals get so caught up in the perceived importance of credit, that they lose perspective. For example, I had a potential client in my office at Steidl and Steinberg that had accumulated a large amount of credit card debt, never missed a payment, and had a credit score of 750. We had the following exchange:
Client: I have so much in credit card debt that all of my money is going to the minimum monthly payments. It’s gotten to the point that I can’t pay my utility bills or buy groceries for my family.
Me: Sounds like you are having a really tough time. Have you considered bankruptcy as a possible solution. If you qualify, a Chapter 7 could eliminate the credit card debt and give you a fresh start. You would once again have money to pay for your necessary living expenses.
Client: Yes, but a bankruptcy would ruin my credit, right? My credit score is 750 right now. I can’t let that go down the drain.
This individual has gotten so immersed in the idea of having good credit, that they have put that ahead of even buying groceries for their family. My position on credit is simple. Having good credit is wonderful. But if you can’t afford to pay for living expenses such as food and medicine, what is that good credit really good for?
Remember, when you pay for something with credit, it is someone else’s money. This is fine in many circumstances. However, the goal should always be to pay for things with your own money and not someone else’s. Further, the effect of bankruptcy on one’s credit is vastly overblown. Most people can buy a car and get a credit card as soon as their bankruptcy case is completed. Many can also obtain a mortgage loan in about two to three years after a bankruptcy discharge. Having a bankruptcy on your credit report does NOT mean that you cannot obtain credit. It just means that your credit will not be “great” for between 7 and 10 years.
In summation, don’t let the desire to maintain good credit prevent you from taking the necessary steps to provide for yourself and your family. In many cases, a bankruptcy is exactly the right thing to do to take care of oppressive debt. Meet with an attorney who knows about both credit and debt options if you find yourself in trouble. As always, at Steidl and Steinberg, we are always willing to help in any way that we can.