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When Should You Focus On Your Credit?

Posted By:  |  June 12, 2014  |  0 Comment(s)

when credit

Author: Anthony Manganiello

Author of The Debt-FREE Millionaire and creator of

When you’re on a debt-relief program, one of the matters you may be concerned about is your credit. Credit is an important personal finance issue for a number of reasons. Yet, depending on what kind of debt-relief strategy you’re using to get your finances under control, there are different times to be focused on making sure your credit is what it should be.

Essentially there are 5 different methods of debt-relief.

  1. The DIY Method: You can “do it yourself” by focusing on becoming completely debt free using something that’s oftentimes referred to as the “snowball” payoff system.
  2. The Loan Consolidation Method: This is where you consolidate your loans by leveraging the equity in your home to pay off high-interest debt. (By the way, I rarely recommend this for a number of reasons that go beyond the scope of this article).
  3. The Debt Management Method: Also referred to as debt consolidation. This is where you work with a third-party debt-relief company that lowers the interest rates on your credit cards. You pay that company directly, and they distribute your payment to your creditors via the new arrangements they’ve secured with your creditors.
  4. The Debt Settlement Method: This is where you hire a third-party debt-relief company to settle your debts. Typically these companies offer lower payments than the previously mentioned options and have less stringent qualification parameters.
  5. Bankruptcy: This is typically the method of last resort and should only be explored when all of the above options seem to be out of reach.

Depending on what debt-relief strategy you’re employing, there are different times to focus on making sure your credit is what it should be. There are times when you should ensure the accuracy of your credit report up front, and times when you should wait until the method you’re using has been completed.

Let’s take a look:

  • Up Front: When you’re using the DIY or Loan Consolidation methods (numbers one and two above) you should ensure the accuracy of your credit in the beginning. This is because during these methods, a more favorable credit score can help facilitate the process.

    How? Simple…

    Ensuring the accuracy of your credit rating in the beginning of these two programs could help you acquire lower interest rates. Lower interest rates mean lower payments. And lower payments means that more of your personal cash flow can be focused on eliminating debt. Of course, this is assuming that ensuring the accuracy of your credit report would result in a more favorable credit rating.

  • At The End: If you’re using one of the last three methods, it’s my professional opinion that you should wait until you’ve completed that method prior to going through the process of ensuring the accuracy of your credit rating.

    There are two primary reasons I suggest this.

    First. If you’re on a debt-relief program like a debt-management or debt-settlement program, your creditors may take a peek at your credit to see why you’re using such a program. If they do, the less favorable your credit appears, the more likely they are to accept new terms… especially in the debt-settlement model.

    Many people I’ve counseled have come to me in a panic while attempting to settle their debts because their credit was looking less and less favorable. My response has always been the same. It’s more likely that a creditor will accept a settlement if your credit looks bad, than if it looks good to great.

    Second, if you’re on a debt-management or debt-settlement program, ensuring the accuracy of your credit during them is counter-productive. Not only because of the reason I’ve just mentioned, but also because while you’re on one of those programs, your credit will be impacted during the course of that program… especially a debt-settlement program. So you should wait until you complete the program so any improvements you’re able to make won’t be erased by the continuance of the program itself.

The bottom line is that you want to be sure your credit is accurate when, and only when, you’re in a financial position to continue to improve it. The two most important ways to improve your credit rating are by making on-time payments and lowering the balances you owe (this accounts for about 65% of your credit rating).

So, when you’re personal financial position is such that those two things can be accomplished with regularity, taking the time to ensure the accuracy of your credit may be a useful exercise. Otherwise, waiting until your personal cash flow will allow you to make your payments on time and continue to drive those balances down, may be your best course of action.


  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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