How Does Debt Affect Your FICO Score?

You know how important a FICO score is. Your credit score is an important part of financial planning because creditors, lenders and even landlords and employers use this score to determine whether or not to lend you money or let you move. And one of the biggest factors in determining your credit score is your debt.

Debt and your FICO score

Your credit score is determined by a number of factors (click here to learn how a FICO score is determined), and one of those is debt. In fact, your outstanding debt accounts for 30% of your credit score. It's second only to your payment history in terms of how hight your credit score is.

Reduce your debt

One of the best things you can do to improve your FICO score is to reduce your debt. Paying down credit card balances and other loans will help your credit rating. It may seem difficult at first, but reaching your financial goals requires discipline and moving toward debt reduction.


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