Debt and your credit score

Debt and credit Score!!

Debt, as you’ve already guessed, plays a significant role in your financial life. Not only does it have an impact on your spending ability, but debt also has an impact on your credit score and your ability to borrow money or pay a cheap insurance premium.

One of the most important elements that affects your credit score is the amount of debt you have; your debt level accounts for 30% of your credit score. Your credit utilization—the ratio of your credit card debt to your credit limit—for each of your credit cards, as well as your overall credit utilization, are taken into account in the IVA credit debt calculation. The larger your credit card balances are in comparison to your credit limit, the lower your credit score will be.

Your credit score also considers how close the debt on your loan is to the original loan amount. It is better for your credit score if you pay off your loan balances. Carrying a lot of debt, particularly large credit card debt, lowers your credit score and makes it more difficult to receive new credit cards, loans, or a higher credit limit. Even though your debt-to-income ratio is minimal, you may still be denied if your debt has a negative impact on your credit score. (It’s worth noting that your income has no bearing on your credit score.)

Things which effect your credit score

Your credit score indicates whether you have a track record of financial stability and prudent credit management. The score might be anything between 300 and 850. Major credit bureaus calculate this score, commonly known as the FICO score, based on the information in your credit file. Here are the components that go into calculating your score, as well as how much weight each one bears.

Payment History
30%
Amounts Owed
25%
Credit History
20%
Types of Credit in Use
20%
New Credit
15%

Repayment of your debt can help your credit score.

When it come to the debt management the best option to manage you credit score is repayment of you debt. Its critical to to keep your credit card balance low to maintain best credit score. Paying off debt is usually a smart thing, because any loan comes with interest.
Repayment also shows lenders that you’re a responsible borrower, which can lead to more financial flexibility.”

Want to know what debts are included and excluded from IVA. Read this: Debts in IVA

Don’t confuse having debt with having a good credit score, no matter how much you owe in debt.

Instead, distinguish between increasing more debt and adding different types of debt. Never take on debt you can’t pay solely to improve your credit score. Borrowing beyond your means is one of the quickest ways to destroy your credit score.

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We’re here to assist you. Debt counsel is now available for free online. If you seeks any kind of the IVA related help or advice contact us.