How Does Credit Debt Affect My Score?

Credit debt can have a positive affect and negative affect on your score. The trick is to find the right balance of accounts and balance ratios to increase your score.

Credit debt can be referred to as revolving debt on your credit report. Although overextending your credit line negatively impacts you, make sure you still use the card so activity is reported to the Credit Bureaus and maintains your accounts as active tradelines.

Avoid flipping credit card balances from one creditor to another prior to applying for a mortgage loan. Many times, the debt will appear with both the current creditor and former creditor. This will give the appearance of more debt than what is actually owed. Review your credit with your mortgage professional.

National credit bureaus collect information from creditors and provide reports to lenders. These reports include a summary of all of your credit accounts. Based on the information collected, each bureau, using an algorithm created by various vendors, also calculates a credit score for the borrower.

Factors that can impact a credit score include:
Poor Payment History
Approaching Your Credit Limit
Short Credit History
Too Many Credit Applications
Too Few Credit Accounts
Too Many Credit Accounts


Past credit problems, such as late payments, can stay on your credit report for up to 7 years from the date the original payment should have been made. Bankruptcies can be reported for up to 10 years. Lenders do tend to give more weight to the most recent payment information. And no matter what your credit is like now, you can take steps to improve your credit for the future.

If you are able to get a credit line increase for your accounts this can help you raise your credit score. By keeping the account balances around 50% of the account limit you appear less risky to the credit reporting agencies. By applying this simple tactic your score should increase, even with your current debt load.

When you are making payments on your revolving credit, also known as credit card debt, make a payment each month that is more than the minimum payment. Even if money is tight pay just a small amount over your minimum payment because this is good for credit scoring. For example if you had a payment that was $51/month, pay $60 instead of the $51 minimum payment required. By doing this on all of your bills you will pay them off quicker, gain points in your credit scores faster and be in control of your finances much sooner.

» DISCLAIMER: The information contained in this article on 'How Does Credit Debt Affect My Score?' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.