Getting out of debt can actually help you improve your credit score. Why is that important? Because your credit score determines credit card debt what kind of interest rates you will get when you apply for loans including mortgages, auto loans, and credit cards. Your credit score not only determines the interest rates you’ll get but also whether or not you’ll be approved for these loans.
So how does credit card debt affect your credit score? Let’s take a look at the important factors.
What Makes Up Your Credit Score?
There are five factors that make up your credit score:
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- New credit (10%)
- Credit type (10%)
As you can see, payment history is the biggest factor when determining your credit score, but the total balance you owe makes up the next biggest contributing factor. This means, if you owe a lot of money on your credit cards — and exceed the target minimum (more on that below) — it’s likely that your credit score will be negatively affected.
If you are having a problem with credit card debt, consider calling Carolyn Secor. Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site www.BankruptcyforTampa.com or call 727-335-7151.