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How Does Credit Card Debt Affect My Credit Score?

 


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If you have looked for information about credit report repair or debt relief, you have probably heard that credit card debt has a negative effect on your credit score. Just about everyone that has problems with their credit has been advised to pay down credit cards and cut them up. That is not bad advice; however, usually with that recommendation, it is also advised to close the paid off accounts. That may actually be a bad idea.

Closing accounts can have a negative effect on your credit score. If you are thinking about closing accounts that deal with paid off debt, it will be to your benefit to contact a credit counselor. An educated, experienced counselor can take a look at your particular situation and help you to make favorable decisions.

What is considered in calculating a credit score?

There are five main categories that are generally calculated into your rating. They include:

  1. Your payment history
  2. Your new credit
  3. The types of credit that you have
  4. The length of your credit history
  5. The amount of debt owed by you
Credit card debt can drive down your rating; however, established accounts that you have used responsibly can actually increase it. A bad payment history will stay on your report for some time anyway, whether or not the account is closed. Therefore, you are likely to get into a predicament if you close accounts without knowing for sure that closing them will actually benefit you.

In some cases, closing accounts will be advantageous, but in many situations it will have a disturbing effect. It will be in your best interest to consult with a professional credit counselor before taking do-it-yourself steps concerning credit report repair.

Laurence H. Michelson is the President of FiCODOC and a financial credit consultant. He is also the author of “Getting the White Picket Fence Without a Man. " For more information please visit his web site http://www.ficodoc.com or call 1-877-899-2565

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