Your credit score is affected by the amount of debt that you owe. This can also be referred to as credit utilization. Even if you pay your bills on time, you still have to know how to get out of debt whenever you are in that position. You must avoid the different types of debt that you may currently have. Below is a list of reasons as to how and why they affect your credit score.
An installment debt is something that most people are familiar with. If you had a house loan that has you paying $1,500 every month for the next 25 years, then you’re paying off an installment debt. It’s much easier to keep track of an installment debt than the other ones which means that it can really affect your credit score due to its perception and how common it is.
With an installment debt, you’re looking at the possibility of having a hard time getting a vehicle leasing company to agree with you on a price later on in the future if you had a house loan that you’re currently paying off or missed a payment for. Though there’s no specific formula on how to calculate installment debts, it’s much easier since you will have a written schedule.
Your credit score can also be affected by just having an installment debt, with no other factors. Many credit rating agencies specify that having a house loan will affect your chances of getting another house loan even if you are actually going to use both properties. This is due to the higher total amount of loan that you will have.
With a revolving debt, you’re looking at a dynamic figure that you will have to pay. Since it will vary from month to month, your actual credit report will also vary from month to month. If you are someone that uses their credit card to shop for groceries and other supplies every other month, you will tend to see a pattern with how much you spend so it’s easier to get out of debt San Diego.
A revolving debt is more common for people who don’t use cash to purchase their basic needs. Although revolving debts are viewed by everyday people as just cashless transactions, they can still affect your credit score especially if you don’t pay a revolving debt from the previous month. You have to make sure that you make good with the agreement that you have to avoid this.
The most common type of debt is an open debt. When you see this on your credit report, you will usually have an estimate as to how much you’re going to pay, however, you will still have to wait until you get your bill before you can pay your balance in full. This is a lot more common for transactions made with telecommunication companies.
They can affect your credit score if you keep having open debts that go unpaid or if your balances are too high for what you actually make.