Debt is often a confusing topic for people. Trying to understand how your debt relates to your credit score can be even more confusing. A look at recent data shows that your debt alone does not impact your credit score as much as your ability to pay it off.

Strangely enough, people with the highest amounts of debt often have the highest credit scores. Let’s take a look at what debt is and how it impacts your credit score.

Understanding the Type of Debt You Have

The type of debt that you have is very impactful when it comes to your credit score. Most people who have great credit scores have different types of credit on their accounts, including credit cards, installment loans, and mortgages. 10% of your credit score is made up of the type of debt that you carry, meaning you want to make sure to maintain a nice mixture of credit types,

Of course, you don’t get any sort of reward for having a ton of debt. You still need to pay your debt off in time if you hope to have a high credit score at the end of the day.

Why Repayment Is So Important

You want to make sure to keep your balances low when it comes to credit cards. Having a high balance means you have a high credit utilization ratio. If a creditor sees this high credit utilization ratio, it makes them think that you are spending more than you actually have available. When you repay your debts in a timely manner, you prevent accrued interest.

Having debt on your record for a long time just means more interest in the long run. Essentially, paying off your debt can positively impact your financial status and save you a lot of money down the line.

Understanding Your Debt

When you are careful to repay your debt on time, you also send a signal to lenders that you are someone they can count on to borrow. No lender wants to provide money to someone if they aren’t sure that they can pay it back. By paying off your debts and knowing how much money you have, you become a far more financially responsible person.

How Tradelines Can Help

Of course, paying off your debts alone isn’t going to get you a great credit score. Great credit scores take years to develop, as most of the components of a great credit score deal with payment history and age. This is where tradelines come in.

When you add yourself as an authorized user to someone else’s account (tradeline), you get to take advantage of their positive payment history and account age. Utilizing tradelines is a wonderful way to build your credit quickly.

If you’re interested in how tradelines might be helpful in your situation, make sure to get in touch with us here at Personal Tradelines. We look forward to helping you meet your financial goals and take your next steps in life.