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Paying down credit card debt can help rebuild credit score

Many people in Escondido are looking for ways to address their financial challenges. For some, they may be getting behind on their mortgage payments. For others, student loan repayment has become a real issue. But, for many, the greatest financial problem they have is credit card debt.

As a recent article noted, credit card debt is considered "bad debt" that can have a negative impact on an Escondido resident's credit score. This is because credit card debt isn't considered to be an investment, like student loans and a mortgage would be. Building up credit card debt doesn't get you a home or an education -- it is simply debt that needs to be repaid.

The good news is that paying down credit card debt can have a positive impact when attempting to rebuild a credit score. The recent article noted that the higher the total amount of credit card debt that a person has, the greater the negative impact on that person's credit score. So, having less credit card debt owed will benefit a credit score. Another aspect of credit card debt that will impact a credit score is what is known as "utilization." In essence, utilization looks at how much available credit is being used. Every credit card has a credit limit, and when calculating a credit score the agencies look at how close to the limit the debtor is. The lower the utilization percentage, the better.

Of course, not everyone is in a position to pay down credit card debt. For some, filing for bankruptcy may be the best option in a bad situation.

Source: Forbes, "5 Easy Ways To Boost Your Credit Score," Nick Clements, Nov. 11, 2016

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