How do different types of debt affect your credit score? Here's a guide to help you understand
credit score. It is often emphasised that borrowers should opt for multiple credit options to maintain a reasonably high credit score. This means rather than relying only on one credit option, one can diversify credit across financial instruments to keep the credit utilisation ratio (CUR) underutilised.
A. Your credit card usage and payment history have a significant impact on your credit score. Making timely payments and keeping credit card balances low relative to your credit limit can have a positive effect on your credit score.
B. High credit card balances, maxing out credit cards, and missing payments can negatively impact your score. A car or home loan, also known as instalment loan, also has a significant impact on your credit score, particularly in terms of payment history and credit utilisation.
If you make timely payments on installment loans, it helps improve your credit score. B. Missing payments or defaulting on installment loans can severely damage your credit score.
A. Overdrafts can impact your credit score similarly to credit cards, depending on your payment history and credit utilisation. Making timely payments and responsible use tends to positively affect your score.
B. High balances and missed payments can harm your score. A.
Mortgages are considered a significant financial responsibility, and your payment history and credit utilisation will heavily influence your credit score. Timely mortgage payments tend to impact your credit score positively. B.
Missing mortgage payments or defaulting on a mortgage can significantly damage your credit score. ALSO READ: Credit Score: 7 effective steps to follow to maintain good credit history A. Personal loans impact your credit score similarly to installment
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