When it comes to how much debt can impact one’s credit score, there is quite a bit of confusion. It is important to note that your ability to pay off your debt has much more impact than how much debt you have.
While many people feel that having a ton of debt will hurt their credit scores, that sentiment is only slightly true. Strangely enough, the people who have the highest credit scores also tend to have the greatest amount of debt.
When it comes down to the correlation between debt and credit scores, there is a lot to consider.
Is Having Too Much Debt a Bad Thing?
As we said before, those with the least amount of debt often have fairly low credit scores. At first, this might seem completely backward if you don’t think about the repayment habits people with a fair amount of debt have. People with credit scores between 350 and 579 have an average of around $38,000 in debt. People with credit scores about the 580 mark typically have three times the amount of debt.
What this should tell you is that credit reporters don’t only take into account how much debt a consumer has. Instead, they like to look at whether or not you can pay off the debt that you have.
If you want to improve your score, you shouldn’t automatically think that having more debt can be helpful. Instead, you should work to make sure that you are paying off the debt that you already have on time. Having a bunch of credit cards that you can’t pay off isn’t helpful.
You might also consider mixing up the types of accounts that you have on your account. Consider obtaining credit products or loans. Having a mixture of account types on your credit report shows lenders that you can pay off a variety of debt. A consumer with a solid mix of credit accounts will likely have a higher score than someone who only has one kind of debt.
The Importance of Repaying
When it comes to having credit cards, it is important that you keep a low balance. Your credit utilization will spike if you have balances that are too high. A high credit utilization ratio tells lenders that you spend more than you can actually pay back.
If you repay your debts in a timely manner, you can prevent accrued interest. The longer you have debt on record, the more interest you will have to pay off in the long run.
The Quest For a Good Credit Score and How Personal Tradelines Can Help
Here at Personal Tradelines, we’re all about making sure our customers are confident throughout the tradeline buying process. We’re here to provide all of the necessary knowledge so that you can find the tradeline that fits your situation best.
Make sure to get in contact with us when you are ready to take the first step towards great cr