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A man and woman look sadly at a piece of paper, theoretically a bill from cancer treatment that is past due and could impact their credit score.

Cancer and Credit Scores: What Affects It and How to Fix It

How are cancer and credit scores connected? The financial burden of a serious illness like cancer can leave you struggling to rebuild your finances, long after completing treatment. Even after eliminating unnecessary costs by finding the right insurance plan for your situation (see Triage Cancer’s Health Insurance resources), you may be saddled with unexpected debt and/or behind on bills, which can hurt your credit score.

Your credit score is critical to everyday life: it may be checked when you attempt to purchase a home, lease a car, rent an apartment, or maybe even apply for a job.

What is a credit score?

A credit score is a three-digit number determined by six main categories of your financial history: payment history, total debt, debt-to-credit ratio, credit history, credit mix, and new credit. Lenders use your score to predict your financial risk.

The most widely used credit score is the FICO© score. Most credit scores range from 280 to 900; a higher number indicates you are considered creditworthy and less risky. If you have a higher credit score, you will likely be offered a lower interest rate when applying for a loan.

You should keep track of your credit score by checking it on a regular basis.

What Affects Your Credit Score & How Do You Fix It?

Raising your credit score can be challenging, but it is possible!

1. Payment History

Your payment history is probably the largest contributor to your credit score, since it shows lenders whether you have been paying creditors on time. 35% of your FICO credit score is calculated based on your payment history.

Creditors consider late or overdue payments to accounts including:

  • Credit cards
  • Retail accounts (like store credit cards)
  • Loans involving regular payments (like car loans)
  • Finance company accounts (bank, credit union, or savings accounts)
  • Mortgage loans

 

Any bankruptcies, lawsuits, and wage attachments (or wage garnishments, when employers take money from your paycheck based on a court order) will also be considered in your payment history.

How do you fix it?

If you can, pay at least the minimum due of every bill, on time.

If you know you cannot pay an upcoming bill, contact your creditors. You might be able to negotiate a payment plan, or extra time to pay before the bill goes into collections. By contacting your creditors before unpaid bills get sent to collection agencies, you can keep these bills from affecting your credit score.

2. Total Debt

Lenders also consider your total debt, or how much you owe on all of your accounts. 30% of your FICO score is calculated based on your total debt.

To figure out your total debt, credit reporting agencies may consider:

  • The amount you owe on all of your accounts
  • The amount you owe on specific types of accounts (credit cards vs. installment loans)
  • How many accounts you owe money to (owing money to many creditors typically hurts your credit score)
  • If you have installment loans (like a car loan), the percentage of the loan you have paid off


How do you fix it?

Paying down debt can feel overwhelming, especially when dealing with the financial toxicity associated with a cancer diagnosis. Though it may feel like an uphill battle, regaining good financial health is possible:

  • Create a current budget
  • Identify expenses that can be reduced
  • Deal with creditors
  • Manage student loans
  • Rebuild your credit

 

For a deep dive into all five steps, visit the Managing Finances module on CancerFinances.org.

Tip: Debt solutions might be helpful, but you should keep in mind that they might have a negative impact on your credit score. Weigh your options carefully, and do what’s best for you. If your financial picture is really challenging, debt solutions may be worth the drop in your credit score.

3. Credit Usage

Your “credit usage” refers to the amount of the credit offered to you that you actually use. If you regularly use all of the credit available or “max out” your accounts, this may lower your credit score.

How do you fix it?

Be mindful of your debt-to-credit ratio. Generally, experts agree that it is a good idea to keep credit card balances under 30% of the available credit on each card. For example, a credit card with a limit of $10,000 ideally should not have a balance more than $3,000.

4. Credit History

Typically, having a longer credit history shows lenders you are an experienced and reliable borrower. Credit reporting agencies might base your credit history on factors like:

  • The age of your accounts, or how long ago you created your accounts
  • How long you have used each line of credit
  • How long accounts have been inactive

5. Credit Mix

Along with the length of your credit history, lenders want to know what kind of credit you have. Typically, it is better to have multiple kinds of credit. For example, it is better for your credit score to have your total debt spread across a mortgage, a car loan, and credit card debt, than only having credit card debt.

6. New Credit

Lenders are wary of applicants who have opened several lines of credit at once. It is better for your credit score to open multiple accounts over the course of your credit history.

Tip: A consumer credit counseling agency may be able to help you improve your credit score by proving you with practical tools, like financial calculators, budget worksheets, and other resources. A consumer credit counseling agency might also be able to help you negotiate payment plans or settlements with your creditors. Find a consumer credit counseling agency here.

If you feel overwhelmed by a damaged credit score, Triage Cancer is here to help. You are not alone.

For more information on rebuilding your credit score and navigating debt, visit CancerFinances.org.

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Kaylee Place
kp@triagecancer.org