Debt Repayment Programs May Help Consumers Qualify For Lower Rates–How Debt Factors Into A Credit Rating

Consumers who are looking to qualify for lower rates on lines of credit like a loan or credit cards, may find that the debt situation and their financial life could have a larger impact than they may have expected, as there are a variety of factors that go into calculating one’s FICO score and when it comes to factors like a consumer’s income and the amount of debt they have, some individuals are in a position where this will work against them when it comes to getting low rates. Obviously, this may be a small issue for some but for consumers who are considering purchasing a home or who may need a car loan will be in positions where these long-term debt repayment obligations could end up costing them much more as a result of their low credit score or it could even put them in a position where a lender sees them as too risky when a high amount of debt may be in place.

Yet, there are even some situations where consumers might not have an excessive amount of debt but may simply not have an income that would allow them to easily repay various obligations. As an example, someone who may have a modest income but could have a mortgage payment, a car payment, and perhaps a student loan could see a decrease in their credit score as a result.

While some might argue that a high debt to income ratio could indeed decrease a consumer’s credit score but it may not be significant enough to cause any real damage, there are some lenders who may see this as a problem despite the fact that a consumer may have no unsecured debts like those that may come from a credit card. However, some consumers may be okay with their financial situation as it is, but for those who may be seeking out a mortgage or car loan or even a credit card, a high amount of debt in their life coupled with a low income could potentially be problematic in not only how a lender may view them or the rates they receive, but it could cause problems down the road if these individuals are unable to meet these debt obligations.

Understandably, some consumers may not be in a position where a high amount of debt to income would impact their ability to get a credit card or an affordable rate on their home loan, but this could be a problem for those who are living on the very edge of their financial means simply because any emergency or unforeseen incident that could require financial attention may put them in a bad situation where missed payments could be likely.

It’s because of these scenarios that some consumers have turned to debt repayment programs as a way to help them not only get control over their financial life and potentially find lower rates on future lines of credit, but they can also help consumers manage their money in such a way that missed payments or financial distress will be less likely. Credit counseling or speaking with a financial professional is not a guaranteed solution, but they can offer an outside opinion on how a consumer is using their income, ways in which they may be able to repay debts faster and more affordably, and of course this could help consumers set themselves in a position where they could begin credit repair practices or work on improving their credit if their end result is to get a higher credit score so that lines of credit may be more affordable.