10 Common Myths about Credit Card Debt and Credit Scores

Myth #1: To Get a Perfect Credit Score, I just need to Pay on time


In the past, if you had a steady income and always paid your bills on time, you were rewarded with a higher credit score-even if you had an unhealthy debt burden.


Not so today. Outstanding debt is now a huge part in a FICO calculation-and that is why many of today’s so-called “perfect payers” are ending up with diminishing FICO scores. These utilization rates are the central component to rewarding perfect payers with perfect scores.


Myth #2: If I Pay my Bills on Time, then my Credit Card Debt Will Go Away


While it’s important for you to pay your bills on time (since our FICO score is determined in part by our payment history) focusing solely on making payments on time as an exclusive strategy to boost your score and pay off your credit cards isn’t wise.


Debt reduction is the answer. A healthy debt-to-income ratio is essential to a solid credit score and financial health. Too much debt makes it impossible to obtain good lending rates or a balanced monthly budget.


However, simply making payments on a $30k credit card balance is a bit easier said than done. In many cases, credit cards come with high interest rates, making it virtually impossible in some instances to pay off the principal in an acceptable amount of time.


Many of us may think about reaching into our 401k savings to pay off the debt. After all, it would give us an immediate clean slate, right?


This is a drastic and often improper alternative made by individuals and families in trouble. There are often better options and none should be overlooked or disregarded without experienced legal advice on better avenues for debt relief.


Myth #3: There’s Nothing I Can do to Fight Against the Credit Card Companies


Not True! Credit card billing disputes are the top complaints issued to the Consumer Financial Protection Bureau. Credit card companies and banks regularly charge people and businesses late fees, interest and other improper fines and wrongful overcharges for payment mistakes that could have been avoided if better communication were put in place. Don’t be bamboozled – know your rights. Contact the experienced credit card billing disputes lawyers at The Law Offices of Neil Crane.


Credit card issuers regularly bury in small print or withhold information that is vital to consumers wishing to avoid fines. If you have incurred any sort of fine or incorrect charge from a credit issuer, our law firm can help you with effective analysis and aggressive advocacy.


We Handle Creditor Communication And Disputes Effectively


At The Law Offices of Neil Crane, LLC, we find an abundance of incorrect and egregious charges by card issuers or banks that think the law doesn’t apply to them. We can also assist you with instances of credit card fraud, excessive fees and other improper charges.


Myth #4: I Don’t Need a Lawyer for Credit Card Consolidation


National credit consolidation companies can be persuasive, but they don’t provide true permanent solutions — at best, it’s a quick fix.


While Large, Out-of-State Companies Are Taking Your Money, Your Creditors May Be Taking Serious Legal Action Against You Here in Connecticut


Many companies that promise to help you with your debt problems will make slow and limited progress on small debts. In the meantime, your creditors may be preparing to take legal action. Many companies continue to take fees as their clients receive endless collection calls and lawsuits here in Connecticut. These companies are a step in the wrong direction, not the required permanent cure. They cannot appear for you or defend you in suits in the courts of Connecticut.  Only qualified and experienced lawyers can appropriately represent you and create real credit solutions.


Myth #5: Having a Good Credit Score means Everything


Do not let concerns over your credit score prevent you from taking real action when it comes to your debt.


The Myth of the Credit Score


Credit card companies want you to be afraid of that score. In fact, they created the credit score to save themselves time and money — not to serve or protect consumers. Your credit score is only one aspect of your overall financial picture. Talk to an attorney who can help you understand what you really have at stake to solve your debt and properly rebuild your credit score on a permanent basis. Debt reduction and an improved debt-to-income ratio are the beginning of a fresh credit report and a high credit score


Besides, taking real action to get the debt relief you deserve could end up helping your credit score. By working with your creditors to consolidate your debt into a plan you can actually afford, you can make timely payments and build your credit score faster than you could on your own.


Myth #6: My Credit Score Will be Ruined if I Claim Bankruptcy


Believe it or not, bankruptcy can help you improve your credit right away. It sounds like a paradox, but in fact, bankruptcy can end the cycle of bad credit. Chances are, you are no longer able to make even the minimum payments on your credit cards, and even if you could, it might take you 25 years at your current interest rate to pay off even a modest balance with minimum payments. Bankruptcy, allows you to throw off the yoke of crushing debt and provides you the opportunity to end the cycle of debt, improve your credit and obtain a fresh financial start.


Proper lending and affordable borrowing depend on three factors:


  • Credit score – your FICA credit score
  • Your debt-to-income ratio
  • Your savings account balance


Good lending and good borrowing that will work for you and not against you depends on your debt-to-income ratio and your bank account. A high credit score is a solid and attainable goal that can easily be recovered after bankruptcy, along with an improved debt-to-income ratio and increased savings. The key is to build a cushion and get your finances in order before incurring more debt without a well-conceived plan.


Bankruptcy Immediately Reduces a Bad Debt-to-Income Ratio


It allows for a future with a chance of savings. Over time, the only means to a financial future is a balanced debt-to-income ratio coupled with easy steps and advice on increasing your credit score without overburdening debt.


Do not let debt collectors, consolidators or creditors mislead you about credit after bankruptcy. The bankruptcy credit myth is a fear tactic to discourage you from getting proper legal advice, and taking the steps that will benefit you, your family and your financial health and well-being.


We can help you discharge your debt, remove judgments, establish an affordable repayment plan for your secured debt and more – all of which can dramatically increase your credit score.


Myth #7: If I Claim Chapter 7 Bankruptcy, then I’ll Lose All of My Assets


The most common misconception about Chapter 7 is that filing Chapter 7 will result in a loss of assets. In fact, nothing could be further from the truth or the purpose of Chapter 7. The vast majority of all Chapter 7 cases are called “no assets” cases meaning that the filing party loses no assets at all. Instead, all of their property was “exempt” meaning yours for the future and “protected” from creditors. The purpose of Chapter 7 bankruptcy is to protect what you own and get rid of what you owe.


Properly prepared Chapter 7 bankruptcy petitions discharge unsecured debt in full and protect all personal assets in full.


Myth #8: If I Claim Bankruptcy for My Credit Cards, I’ll Be Left with Nothing


Chapter 7 laws were written to provide debt relief and the ability to obtain a new financial future. The authors of the law understood the need to preserve and protect “basic” assets needed by individuals and families to obtain a fresh start. They therefore create strong federal and state laws to exempt or protect certain basic assets from seizure or collection by creditors.


“Exemption laws” protect the assets necessary to assure that all individuals and families will be allowed to continue forward with the items that facilitate and promote their opportunity for a fresh start and future success.


Federal bankruptcy exemptions include a variety of protection provisions subject to certain value limitations:


  • Automobiles are protected
  • Equity in personal homes up to $75,000 per person is protected
  • Cash accounts and other items of value are protected by the Wild Card Exemption to $12,725 per person
  • Pensions, 401Ks, IRAs and other tax qualified accounts are protected
  • Household goods are protected and valued at “tag sale” value
  • Cash values in life insurance policies are protected up to $12,250
  • Miscellaneous other items and belongings are also protected.




Myth #9: I Won’t be Able to Discharge All Unsecured Debt Using Chapter 7 Bankruptcy


Chapter 7 bankruptcy allows for the discharge of nearly all forms of unsecured debt, including:


  • Credit Cards
  • Personal Loans
  • Medical Bills
  • Payday Loans
  • Car Taxes over 1 year old
  • Income Taxes over 3 years old
  • Deficiency Judgments
  • Other forms of unsecured debt


The primary function of Chapter 7 is the extinguishment or “discharge” of unsecured debt in full. Chapter 7 protects assets and future pay from old bills and allows for a financial fresh start. Obtaining the full range of Chapter 7 debt relief coverage and asset protection requires the knowledge and assistance of an experienced Chapter 7 attorney.


Myth #10: Bad Credit Card Debt is Only for the Young College Student




Seniors often carry more credit card debt


As with younger individuals who file for bankruptcy protection, credit card debts and medical bills are two of the main factors in bankruptcy filings among older individuals. Often, these financial challenges are even more pronounced among the elderly. With health care costs on the rise and incomes in decline due to higher unemployment, stagnant Social Security payouts and cuts to pensions and retirement plans, today’s older individuals often end up feeling that they have little choice but to use credit cards to make ends meet.


Not only are older filers more likely to have credit card debt than their younger counterparts, but those who do tend to carry larger balances.


Higher medical bills


Medical debts also tend to be high among older individuals due in part to the fact that medical problems tend to become more numerous and severe as people age. Unfortunately, many older people also experience a decline in income at the same time as their health care costs are rising.


Especially for those living on a fixed income, even routine care and medications can be difficult to afford. For seniors with more serious health concerns, the bills can quickly pile up and become unmanageable.


If you are approaching retirement age and are interested in learning more about your options for getting out of debt, consider speaking with an experienced bankruptcy lawyer about your situation. A lawyer with an in-depth understanding of bankruptcy and debt issues can help you weigh your options and pursue a course of action that will meet your needs.


Providing Solid Solutions, Not Short-Term Bandaids


We are committed to curing your debt problems by providing permanent protection and long-term financial improvement. With today’s difficult economic times and Connecticut’s high cost of living, unsecured debt robs a family of the monthly income necessary to save homes, keep cars and make the essential payments required to meet your basic monthly living costs. Unsecured debt and credit card debt is the worst form of unsecured debt. It has the highest interest rates and it never goes away. Fortunately, with the help of an experienced Connecticut bankruptcy attorney at the Law Offices of Neil Crane, credit card debt relief is attainable through a variety of methods customized to meet your specific monthly budget. To understand all of your options, call us for a comprehensive analysis of your budget and all possible avenues for debt relief. We’ll take the time to provide you with the complete benefit of over 35 years’ experience in solving the financial problems of Connecticut residents.




Find out more about the Credit Card Debt Relief process