Posted on: Jul. 29, 2017 in Credit Score

Millions of Americans have debt. The latest statistics show that there is $764 billion total credit card debt. Over three quarters of adults in the U.S. have credit cards and the average household debt on these cards is $6,662. Throw in mortgage debt ($8.63 trillion) and auto loan debt (1.16 trillion) and you can see that anyone who is in debt is certainly not alone.


If so many people are in debt, then how can it be so bad? Not only does debt lead to stress at home and at work, it can bring down your credit score. While it may seem like the last thing anyone with debt needs is to borrow more, we all know life isn’t that simple. You may need to get a new car or have a medical emergency. A low credit score can mean that if you qualify for more credit, the interest rate can be very high, helping to ensure your lender makes as much money as possible, even if you default. What’s more, your credit score impacts your ability to rent an apartment or even get a job.

How much debt is too much? Any debt you can’t pay back right away can hurt you. Any balance that threatens to wipe you out is too much. If one missed paycheck means you’ll end up late or defaulting on loans, you’re in a dangerous situation.

It’s unrealistic to say that a person should have no debt at all. How much of your available credit is referred to as your utilization ratio. When it comes to credit cards, aim to use no more than 30% of your available credit. That means if you have a card with a limit of $10,000, don’t use more than $3,000 at any one time. It’s even better if you can keep it under 10%. Keep in mind that even if you charge that much and pay it off before the month ends, if your card reported your data to one of the credit bureaus before you made that payment, your score could get dinged.

If you have a good payment history and your debt is not too high, chances are having some won’t bring your score down too low. But if you have mountains or you’re having trouble paying the impact can be significant. One of the best things you can do to raise your credit score is to chip away at that debt as best and as quickly as you can.

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