Many consumers do not understand the impact that debt has on their credit score. Further, they do not understand the various actions that can affect their score. Some of these debt actions may seem innocuous, but can have far reaching repercussions to the unwary consumer. This article will look into a few of the ways that debt and your credit score are linked.
The most obvious way that debt and a credit score are linked is when the consumer fails to make timely payments. As debt mounts, paying the bills on time can become harder and harder and a few bills may end up being paid late or not at all. If a bill is over 60 days late, it is likely to be reported to the credit agencies and will, ultimately, affect your credit score.
Another issue with debt and credit score is the level of debt that a consumer has on file. Your credit score is based on a many factors and one of the most important is the debt-to-income ratio. Even if you are paying all of your bills on time, if the percentage of debt that you have reaches a certain level as compared to your income, red flags go up at the lender’s office. In other words, the more money that is required in order to pay...
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