Bad Credit Resource Center

If you’re carrying a large debt load, your credit score will suffer.  Paying down your debts to a minimum will help boost your credit score. 

For example, if you have a $1,000 limit on your credit card and you regularly carry a balance of $900, you’ll be a less attractive credit risk to lenders than someone who has the same credit card but carries a smaller balance of $100 or so. 

If you’re serious about elevating your credit score, then start with the largest debt you have and start paying it down so that you’re using a lesser percentage of your credit total.

Generally, try to make sure that you use no more than 50% of your total credit. 

For example, if your credit card has a limit of $5,000, make sure that you pay it down to at least $2,500, and work at carrying no larger balance for that card.  If possible, reduce the debt even further. 

If you can pay off your monthly credit card balance in full… that’s even better. What counts here is what percentage of your total credit limit you are using - the lower the better.

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This post addresses another key issue regarding fixing bad credit. A careful reading of this material could make a big difference in improving your credit score.

If you have many lines of credit or several huge debts, you’re a worse credit risk because you are close to “overextending your credit.”  This means that you may be taking on more credit than you can comfortably pay off.  Even if you’re making payments regularly now on current bills, lenders know that you’ll have a harder time meeting your debt obligations if your debt load grows too much. 

The higher your debt the greater your monthly debt payments, and so the higher the risk that you will eventually be unable to repay your debts.  Plus, statistical studies have shown that those with high debt loads have the hardest time financially when faced with a life crisis such as unemployment, a divorce, or sudden illness. 

Lenders (and the credit bureaus who calculate your credit score) know that the more debt load you carry, the greater problems you’ll have in case you do run into a life crisis. 

To have a great credit score, avoid carrying excessive credit.  You should stick to one or two credit cards and one or two other major forms of debt (car loan, mortgage) in order to maintain the best credit rating.  Do not apply for every new credit line or credit card just “for emergencies.”  Borrow only when you need it and make sure your debt payments are.

Also, be aware that taking on several new credit accounts in a relatively short period of time will cause your credit score to drop because it looks as though you’re being financially irresponsible.

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