Impact of credit utilisation on credit score

Mar 27 2010 Since your credit score is a function of how good your payment history is and also depends upon your current liabilities, it is worthwhile to always make payments on time and not let liabilities accumulate. You will do especially well to clear off smaller debt payments so that they do not influence your credit score negatively.

Here, it is important to state clearly the extent of current liability impact. Mortgage loans that you may have taken do not carry the same weight age as credit card debt and is viewed more sympathetically. That is because these will be settled over a period of time and the debt is quite a secured one. The lender can seize your house or property if you persistently default.

Credit card debts however are viewed more seriously and can severely dent your credit score if not settled on time. The credit utilization factor is taken into account and that determines the impact on your credit score. If you have a credit limit of $10,000 and owe an amount of $8000, then your credit utilisation is eighty percent and that is considered as high risk if your payments are not made on time.

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