The 4-letter word that can ruin your credit

Here's what you can do when it's making a mess of your financial life.

By Mar 3, 2014 3:34PM
This post comes from Adam Levin at partner site on MSN MoneyFour-letter words can ruin a lot of things in life -- a nice family dinner, a job interview, your relationship with your mother. But there’s one four-letter word that can wreak such havoc on your life that you won’t be able to live in the place you want, drive the car you prefer or even get the cellphone plan you like.

That word is debt.

Woman using calculator on desk full of bills and statements © Sheer Photo, Inc/Photodisc/Getty ImagesDebt is the quintessential American experience these days: most people sign up for it at the age of 18 (or even younger) in the form of student loans; we use it to buy cars, which depreciate in value almost immediately; it underpins, for better and sometimes worse, our housing market; and, increasingly, Americans take on credit card debt to fill gaps in their budgets and even just complete purchases.

All told, the average American today owes about $225,000 in debt, in a country where the median household income is just barely more than $53,000. The average credit card debt alone, for those who carry it, is more than $15,000.

While access to credit enables us to carry these kinds of debts, they hurt our ability to gain access to more credit -- so the big-screen television you buy today could well be the one thing that prevents you from getting a mortgage on the perfect house next year.

A thousand cuts

Emily Gould’s great essay on Medium this week highlights just how easy it can be to generate life-altering debts with a few small (but daily) decisions. In her case, she quit a full-time job to write a book, but didn’t give up the spending that the full-time job had enabled: she kept an apartment by herself for longer than she could afford, kept up her coffee-and-bottled water habit until, by her own admission, she didn’t have the cash to buy it and even continued to see a therapist who didn’t accept insurance until she was nearly $2,000 in debt to her own doctor.

Gould isn’t alone in many of her choices: Talk to anyone who got themselves into a massive amount of debt, and it was rarely any one big purchase (though it is often massive medical expenses, which is one reason that it was smart for Gould to keep paying for her own health insurance). Instead, debt usually piles up in hundreds of small increments, followed by incremental rolling interest payments and the accumulation of even more debt, until the credit card companies cut you off and the collectors start calling.

What Gould doesn’t mention is that racking up debt can have implications far beyond the hit to one’s self-esteem and sense of security. Indebtedness has a direct impact on your credit score (and perceived credit-worthiness) and, increasingly, a bad credit score can impact your life in a variety of unexpected ways.

Want to rent a new place? A bad credit score might keep a landlord from offering you a lease. Itching to buy a home? A bad credit score can keep you from qualifying for a mortgage at all, or will significantly increase the interest rate you are offered. Looking at a new car? Your bad credit score will definitely hurt your ability to get a low-priced auto loan and could even keep you from lowering your insurance rate.

The impact of your debt-related credit score doesn’t stop there. Your utility company could force you to pay a deposit to turn on the electricity if your credit is bad. A cellphone company might do the same -- or refuse to offer you a two-year contract with a cheap cellphone plan.

Facing reality

So what can you do if you’re already mired in debt? First, check your credit reports, which are free yearly with each of the major credit bureaus, make sure you understand what you owe, and correct any errors. You can also consider a free service, like's Credit Report Card, which updates your credit scores monthly.

Second, start paying down that debt, no matter the daily sacrifices you have to make. There are various schools of thought when it comes to reducing debt and each one has its positives and negatives -- but pick one and get started.

Finally, make a plan for when you are finally debt-free: Identify the spending behaviors behind your debt and make sure you don’t fall back into bad habits. It’s no use getting out of debt to improve your credit score, only to turn around and scuttle all your hard work because you miss that daily latte.

Though talking about your debt in polite company isn’t as likely to raise as many eyebrows as some other four-letter words we all know, it is the word most likely to have lasting consequences for your life. So make sure you use debt as wisely and judiciously as you would an f-bomb -- sparingly, and only when it’s really important for what you want to accomplish.

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Mar 4, 2014 2:23PM
4 letter word that can ruin your credit...

Mar 3, 2014 6:44PM
Most of the people I know who brag about not using credit and dealing all cash never mention it's because they had credit once and were pretty much deadbeats. They stick to cash because they have no choice. I prefer having an 800 credit score and paying my two credit cards in full each month.
My favorite 4 letter word is: CASH, don't need a credit score, don't need a line of credit, for the benefit of liberals, that means that I live my life without the fear of BEGGING AND PRETENDING IT IS A COMMON OR NORMAL PART OF LIFE!
Mar 4, 2014 12:16AM
Well I have pretty good credit  and I do use  one card and its paid for the entire amount so I don't have  any interest charge .I pay cash so the bankers can't spend my hard earned money am too stingy to pay interest .Pay cash for  brand new vehicles and I am also in the low income bracket !
Mar 4, 2014 10:22AM
The  best solution is not to incur debt at all if you can possibly avoid it.  The only debts I've ever carried in my life were those involved in buying a car, and once to buy a house (now paid off!); even used cars require a loan these days.  Student loans? So much malarkey.  There are a whole host of ways to avoid them, which worked beautifully for me.  There is only one reason for anyone to go to a college away from home and live in a dorm, and that's if a local college doesn't offer what you want to study.  I went to a local college on a state regents scholarship (which only covered tuition and books, not room and board) and remained at home with my parents.  Work-study programs provided any extra pocket money I needed, and even allowed me to contribute to the household "kitty."  The rule of my life is, if I can't pay cash on the barrel, I don't buy it.  Thus, at retirement, I had everything I needed, and no debt.  Yes, it meant I "did without" a lot of things, but as it turned out, I didn't really NEED those things.  There's a big difference between "needs" and "wants," and once you wrap your head around that concept, you'll find that you can do without most of the "wants."
Has anyone ever thought.......the credit system was created to create debt? or Economic Slavery for that matter?
Mar 4, 2014 10:14AM
To be without DEBT would be the ultimate goal and most of us would be tickled pink to be there but  life with todays political parties this is only another dream..... It may now be forever the new AMERICAN DREAM! God please deliver us from greedy and selfish politicians.....
Mar 4, 2014 10:58AM
Some debt is good for your credit rating.  A lot of debt is bad.  It's like anything else in life.  Too much of anything can be bad at times with the exception of love.  The world needs more of that.  So just try and control your spending and pay what you can on your bills.  Remember this:  How much do you really need all that stuff you buy?
Mar 4, 2014 7:50AM
my favorite four letter word me some...
Mar 4, 2014 11:25AM

The worst part is when all the toxic debt gets paid off, the rest of the overtime is trimmed, and the mortgage becomes toxic debt.

Good by American Nightmare...and good riddance.

We will be debt free by the end of 2014.

Mar 4, 2014 4:11PM
DEBT will ruin your Credit Score?  This is suppose to be news?  Who writes this crap?
Really? Too much debt can damage your credit rating? Who da thunk it?
Mar 3, 2014 7:10PM
Doesn't seem to bother Uncle Sam Obama!!!
Mar 4, 2014 11:06AM

There is only one thing better than your own money: OTHER PEOPLES MONEY !

Of course you have to manage that leverage wisely but if done correctly, can lead to huge gains.


This is just for business-not your personal finances. In fact, I would recomend that you stay under a 10% debt/asset ratio for any unsecured debt in your personal finances. Anything larger will expose you to risk that you might not be able to control.


Down with the Federal reserve NOW!!!!!!!!


Bring those bloodsuckers of the Planet into the streets.........expose thioer bloodsucking ways!


Even Nixon understood this........

Mar 3, 2014 6:23PM
Incorrectly "Help" can make your credit score double the effect`s of negativity.
Mar 4, 2014 10:45AM

all I can think of is she sells sea shells by the sea shore

Mar 9, 2014 10:48AM
Another rough day at the "Print whatever you want to place"?
Mar 9, 2014 10:53AM
This is true.  Actually, debt will not only ruin your credit score, but it can ruin your life because you just become more and more consumed with it.  Stop spending now and get those bills paid.  Then you can start saving and investing for your future.  Your retirement years depend on it whether you continue to work late in life or not.  Don't set yourself up for failure by spending every dime you have.
Mar 4, 2014 4:42PM

Prior to '72 , it was illegal to charge more than 6% interest.

Nixon(repub) ended the usery laws and set this program of debt slavery.

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