When Facing Disaster Your Credit Score Should Not Be Your First Concern
I speak with dozens of small business owners every week, all confronting disaster as they cannot pay their loans. Revenues are down, overhead is up and debt service is impossible to pay. They are either in default or cannibalizing their business and their own financial structure so they can live to pay their debt service another month.
What amazes me is that after an in-depth analysis of their financial picture and a presentation of how our debt forgiveness strategies can work to help them, their first question is most often, “How will this affect my credit score?” To me, that is like standing on the gallows waiting for the hangman to pull the rope and asking if this will muss your hair.
Really, when facing imminent disaster and total loss, does the effect on your credit score really mean anything? Is your credit score more important than complete financial ruin? Yet I hear this question over and over.
Fortunately for all these brainwashed small business owners, the credit score is not affected at all by defaulting on a commercial note and filing an Offer in Compromise to resolve the shortfall. The loan is made out to the entity and the entity is in default, not the guarantor (typically, the owner). Thus, there is no credit blemish.
But the real answer is even if it does affect your score, SO WHAT? BIG DEAL!!! Really friends, let’s get our priorities straight – survival first, credit score last.
It is even more absurd a notion, as when your business crashes and burns (which it will under many situations we review) you’ll go into default, and that is when whatever is going to happen to your credit score will happen. Why be concerned about a controlled wreck when a wreck will happen anyways?
Nothing will happen to your credit score from a default and even if it did, survival is the primary objective and your credit score is fairly irrelevant.
