Many consumers in Connecticut and around the nation are concerned with their credit scores. Higher scores result in more favorable rates for large ticket purchases and a broader selection of options for financing. On the other hand, lower scores may have occurred for those overwhelmed with bills and in situations where they need debt relief. Experts have weighed in on how paying off loans can affect one’s credit score.
Financial counselors often recommend paying off credit card balances to boost credit scores. While this strategy works well with credit cards, it doesn’t necessarily yield the same increase to credit scores with other types of debt. For example, if someone paid off a mortgage or car loan early, it may actually have a negative impact on a score. With some scoring models, this action may make a person appear less credit-worthy. So it may be more advantageous to keep car, home or other installment loans open to maintain credit scores.
However, credit cards are viewed differently when determining credit scores. Those are considered to be revolving accounts where balances can carry from month to month. For these accounts, it is better to have a zero or low balance with a high credit limit to boost a credit score.
To maximize credit scores, it is best to have a variety of credit accounts, including both revolving and installment loans. It reflects well upon a consumer who demonstrates the ability to manage all types of credit. Certainly, keeping payments to the various accounts up-to-date helps keep credit scores up, while late or delinquent accounts cause the score to decrease.
While many consumers are satisfied with their credit scores or only want to make improvements where possible, others may be simply trying to keep their heads above water. For those seeking debt relief, a Connecticut bankruptcy attorney can provide assistance. A knowledgeable lawyer will work with clients to discuss available options and develop a plan to get their finances back on track.