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Five Components of Your Credit Score – Amounts Owed (Part 2)

We continue to work our way through the five factors that impact your credit score. This week, I continue the discussion about amounts owed.

Whether you’re showing an amount owed on certain types of accounts
In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than carrying no balance at all. Having a low credit utilization can be better than having a high one, or none at all. For example, closing unused credit accounts that have zero balances and are in good standing will not raise your credit scores.

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How many accounts have balances
A larger number of accounts with amounts can indicate higher risk of over-extension.

How much of the total credit line is being used
Someone who is close to “maxing out” credit cards has a high credit utilization ratio and will see lower credit scores than one who exercises moderation.

How much is owed on installment loans compared with original amounts 
Paying down installment loans is a good sign that you’re able to manage and repay debt.

Click here to read part one in this six part series.

Click here to read part two in this six part series

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