Do balances owed affect your credit? June 12, 2018

The amounts you owe on loans, credit cards, etc. can affect your credit score immensely.? It consists of a crazy 30% of your entire credit score! That means this section weighs almost as much as all your positive payment history and all your derogatory accounts, such as collections, charge offs, tax liens, late payments, bankruptcies, judgments, and so on (other than inquiries) combined. Don?t get confused on the name either, “Amounts Owed,” is very unclear and is usually interpreted incorrectly.

The meat and potatoes of “Amounts Owed” is related to revolving accounts.? Owing too much on revolving accounts, thus raising your debt utilization ratio, hurts your score a lot.? This section likes you to have balances, likes to see usage, but penalizes you if you are using them too much. For example, as unpleasant as a tax lien is, it is still not revolving and therefore doesn?t negatively impact your “Amounts Owed” Section. This also applies to, say, a utility collection. However, a large balance coupled with a late payment on a department store card is worse than the tax lien and the utility collection.