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How Does Debt Affect Your FICO Score?

Finance

You know how important a FICO score is. Your credit score is an important part of financial planning because creditors, lenders and even landlords 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 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 high 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.

Profile: Miranda Marquit

Miranda is a financial journalist. Her work has appeared in a number of publications, online and off, and been mentioned by the Wall Street Journal, USA Today, NPR, and Consumerist. Miranda is a contributor to U.S. News & World Report, and writes at the blog Planting Money Seeds. She is also a panelist for the Money Mastermind Show, and the Money Tree Investing Podcast.