Your Current Debts

It is surprising to many people when they find that their current debts affect their credit score almost as much as their previous history.

In fact almost a third of your credit score is determined by your current levels of debt and the types of debts that you have.

The reason why current debts are so important is because they can indicate to a potential lender that you might already be strapped for cash and have difficulty making repayments on your loans.

Even if you can show that you have been making your payments and you have a good record with no defaults they will take into account that any additional loans will make your repayments increase and that might be all that is needed to 'break the camels back' and that places all your loans into a higher risk situation.

Another factor that the credit bureaus will take into account apart from the level of current debt is when the debt money was initially borrowed.

If a lot of the debt has been borrowed recently this will alert them to the fact that there could be problems with finances that have necessitated additional borrowings.

The best way then to increase your credit score is to start paying down your current debts so your financial position and ultimately your ability to make your debt repayments will look more favorable and your level of risk will be lower.

If you can increase your income then this will also help, as it will make repayments easier thereby lowering your risk, however for most people an increase in income is not an option.

The number of loans that are current has an effect on your score also. Reducing the number of loans, even if the total debt remains the same can help in some circumstances.