The Amount You Owe

About 30% of your score is based on the amount you owe.

Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower and may not negatively affect your score. However, owing a great deal of money on many accounts can indicate that a person is overextended and is more likely to make some payments late or not at all. Part of the science of credit scoring is determining how much is too much for a given credit profile.

Determining Factors for the Amount You Owe

The amount you owe on all the above listed accounts will determine this part of your credit score. Even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report.

  • In addition to the overall amount you owe, your score reflects the amount you owe on specific types of accounts, such as credit cards and installment loans.
  • In some cases, having a very small balance on your credit cards without missing a payment shows that you have managed your credit responsibly, and can raise your credit score more than having no balance at all. On the other hand, closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score.
  • Having many accounts with accumulated balances can indicate a higher risk of over-extension.
  • Being close to your credit limit on credit cards or "revolving credit" accounts can indicate a higher risk. Someone closer to "maxing out" on many credit cards may have trouble making payments in the future.
  • The amount you currently owe on installment loans compared to the original loan amount can raise your credit score. For example, if you borrowed $10,000 to buy a car and you have paid back $2,000, you owe (with interest) more than 80% of the original loan. Paying down installment loans is a good sign that you are able and willing to manage and repay debt.
  • If any of these accounts show late payments, your score will go down.