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The top questions and answers concerning debt

Updated: Oct 7


I get questions all of the time concerning debt. In the three-year research effort to write my book, Deceptive Money, I find that there is a great deal of misunderstanding when it comes to dealing with debt.


I thought I would share with you the top questions that I get concerning debt.


1. Will my credit score go up once I have paid off a debt in collections? What if I don’t pay it in full and just settle it?

  • Anything that you do to settle a debt in collections is positive. However, many variables can limit the positive impact on your credit report. It really depends on everything else that is on your report. Keep in mind that most of the damage is done to your credit score when it goes into collections.

2. Why are the credit scores different at the three credit reporting agencies?

  • First, they all have their own tweak to the FICO score. Second, it is rare that all three reports have the same information. That can make a difference.

3. Is it smart to just not use credit at all?

  • This is a financed based society. You need to have a credit score. Using credit each month and paying it off each month is good for your credit score. Even if you had unlimited amounts of money, not having a strong credit score could hurt you at some point.

4. Can credit card companies legally change your interest rate?

  • Before the credit card act being passed in 2009, they could change anything on your contract. Today, that is still the case to a lesser degree. They must tell you in advance when they will change your terms. There is only a limited positive impact from the Credit Card laws.

5. Why does your credit balance increase so much when it gets to a collection agency?

  • Collection agencies add a ton of fees and penalties….most of which are not valid.

6. Do these companies that advertise that they can repair my credit score really work?

  • There is no magic to improving your credit score. Thus, there is nothing that they can do for you that you cannot do for yourself. Some companies guarantee they will get everything removed, but that is not possible. These credit solution companies (as I refer to in my book) will tell you to dispute everything on your credit report regardless of whether it should be there or not. Said another way, they ask you to misrepresent yourself to the credit reporting agencies in the hopes that some of those items will disappear.

7. What is the quickest way to improve my credit score?

  • There is no quick way. It takes time and positive credit activity. This requires using a credit card daily and then paying that card off in full each month.

8. If I want something correct on my credit report, do I need to contact all three credit reporting companies?

  • You only have to contact one. If they make changes, they are to contact the other two and have it corrected.

9. I have no debt and feel like I am on track for my financial goals. Do I really need a credit score?

  • Dave Ramsey says that the credit score is not important. I would disagree. In a financed based society, it is imperative to keep your credit score strong. Plus, you cannot ever say that you will not need to take out a loan in your lifetime. You need a credit score for insurance scoring, and you might even need it for a job interview.

10) Can anyone check my credit file?

  • Creditors don’t need your permission to check your credit file. They just need a “permissible purpose,” and there are a lot of permissible purposes. A credit inquiry is just a statement of the fact that someone inquired about your credit. It only counts against your credit score when you request a creditor to check your credit score so that you can secure credit.

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