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Why Your Credit Score Isn’t As Important As Getting Out From Under Your Debt (with Real-Life Examples)

While having a good credit score may seem essential for financial opportunities like loans and mortgages, getting out of debt should be your main priority. Many people find themselves focusing on their credit score, but in reality, being free from debt has a far greater impact on your long-term financial stability. Here’s why paying off or settling debt is more important than your credit score, with examples from people who have navigated debt settlement.

1. Debt Causes Financial Stress and Strain

Carrying a heavy debt load can feel like a weight on your shoulders, affecting your mental health and daily life. Instead of focusing on your credit score, getting out of debt reduces this financial burden, which improves your overall well-being.

Example from Reddit: One Reddit user shared their story of settling credit card debt. They had around $20,000 in credit card debt with high interest rates, causing them immense stress despite maintaining a decent credit score. After settling for around 50% of the total, their credit score took a hit, but they immediately felt the relief of not having to make minimum payments every month. They described it as a “weight lifted off my chest” and said that the temporary dip in their score was worth the peace of mind.

2. You Can Always Rebuild Your Credit Score

A common fear is that settling or paying off debt will damage your credit score forever. In reality, your credit score can be rebuilt once you’re in a stable financial situation. Settling debt may cause a temporary drop in your score, but it sets the stage for future financial health.

Quora User Example: On Quora, a user shared how they settled $30,000 in private student loan debt through a debt settlement company. Their credit score dropped from 720 to 620, but within 18 months of consistent on-time payments on their remaining obligations, they had already rebuilt their score to 680. They noted that, even though the settlement affected their score, being debt-free allowed them to save money and stabilize their finances, making it easier to focus on rebuilding.

3. Debt Settlement Saves You Money in the Long Run

Credit scores may help you get lower interest rates, but paying off debt—or settling it—saves you a lot more money over time. Continuing to make minimum payments on high-interest debt often means you’re barely touching the principal. By settling your debts, you eliminate a huge chunk of what you owe and reduce the overall cost.

LinkedIn Example: A professional shared their story on LinkedIn about settling $40,000 in credit card debt through a debt settlement company. They were making minimum payments for years and calculated they were paying over $6,000 annually in interest alone. After settling the debt for 40%, they not only reduced their monthly payments but also saved thousands in future interest. They acknowledged the hit to their credit score but said it was worth the long-term savings.

4. Financial Freedom is More Valuable Than a High Credit Score

Being free from debt gives you room to breathe and opens up opportunities that aren’t possible when you’re making large monthly payments. Instead of being chained to your debt, you can start saving, investing, or building an emergency fund. While a credit score is just a number, financial freedom is a reality that lets you move forward.

Facebook Group Example: In a personal finance Facebook group, one member shared how they settled $15,000 in medical debt, which dropped their credit score from 700 to 620. Despite the lower score, they said that being able to put money into savings for the first time in years was “life-changing.” They used the extra cash to build an emergency fund, which gave them more financial stability than maintaining a perfect credit score ever could.

5. Credit Scores Don’t Reflect True Financial Health

Your credit score measures how well you manage debt, not how well you manage your overall finances. You could have an excellent credit score but still be struggling to get by financially because of overwhelming debt. Settling your debt and freeing up your income for savings or investments is a better measure of financial health.

X (formerly Twitter) Example: A user on X posted about how they had a 750 credit score but were living paycheck to paycheck because they were buried in credit card debt. After settling $10,000 of their debt for 50%, their score dropped, but they said they finally had the freedom to start saving for retirement and other long-term goals. They commented, “I’ll take a hit on my credit score if it means I can actually live my life.”

6. Debt Relief Improves Your Overall Financial Situation

Debt relief, including debt settlement, offers a way out of the cycle of high-interest payments. Settling debt allows you to focus on other financial goals, like building an emergency fund or investing in your future, rather than constantly throwing money at minimum payments.

Example from Reddit: In another Reddit thread, a user shared how they settled $25,000 in credit card debt for around 45%. While their score dropped by about 100 points, they were able to start saving again. Within two years of paying off the settlement, their score had recovered, and they had saved enough to put a down payment on a house—something they never could have done while still in debt.

7. Debt-to-Income Ratio Matters More Than Credit Score

Lenders often look at your debt-to-income ratio (DTI) when evaluating loan applications. A high credit score with a high DTI can still hurt your chances of getting approved. Paying off or settling debt lowers your DTI, which is just as important—if not more—than your credit score.

Quora Example: A user shared their experience on Quora about getting turned down for a mortgage even though they had a 740 credit score because their DTI was too high. After settling $50,000 in student loan debt, their DTI improved, and they were able to get approved for a mortgage despite having a slightly lower credit score.

8. Long-Term Financial Health is More Important

Focusing on long-term financial health is more important than preserving a high credit score in the short term. By eliminating debt, you create a stable financial foundation that allows you to save, invest, and plan for the future. Your credit score will recover, but the financial freedom gained from being debt-free lasts much longer.

Conclusion: Debt Freedom is More Valuable Than a Perfect Credit Score

Real-life examples from platforms like Reddit, Quora, LinkedIn, Facebook, and X show that while settling debt may hurt your credit score temporarily, it offers long-term financial relief and stability. People who prioritize getting out of debt often find they can save money, reduce financial stress, and take control of their financial futures.

So, if you’re considering debt settlement or another form of debt relief, don’t be overly concerned about your credit score. It can always be rebuilt, but the freedom from debt is far more impactful on your financial and personal well-being.