The Ways Your Debt Management Plan Affects Your Credit Score

Introduction: Why is Credit Score Important?

Your credit score is a number that represents how well you manage your credit. It’s not just a number though. Your credit score can affect your life in many ways from buying a home to getting the best interest rates on loans to finding a job. There are four important factors that make up your credit score: payment history, amount owed, length of credit history and mix of credit types.

*Payment History – This factor includes whether or not you have made payments on time and how long it has been since you have missed a payment.

*Amount Owed – This factor features the total amount of debt that you owe across all of your accounts and loans, including mortgages and other types of debt like auto loans.

*Length Of Credit History – Your length of credit history is calculated

What are the Different Components of Your Credit Score?

The different components of your credit score include:

-Payment history: 35%

-Length of credit history: 15%

-Credit utilization: 30%

-Number of recent inquiries: 10%

-Types of credit in use: 10%

How Does Your Debt Management Plan Affects your Credit Score?

A debt management plan works to pay off your debts. It is essentially a repayment schedule, based on you income and what you owe. With a debt management plan, you are also more likely to get approved for loans.

Understand the various ways in which your debts are legally handled in order to negotiate better rates with creditors or even file for bankruptcy protection. You can also decide how best to reduce your debt over time by using a debt management plan, which could be arranged with creditors on your behalf.

The Dangers of Poor Debt Management and How it affects Your Mortgage and Loan Approval

With the economy on a steady rise, it is important to make sure that you are not carrying too much debt.

Improving your credit score has never been more important. For individuals with poor credit, it is hard to make any purchase or borrow any money without being denied. Carrying too many debts will likely hurt your approval for a mortgage or loan application due to poor debt management.

We’ve compiled some tips on how you can improve your credit score and get out of debt so that you can move forward in life and secure your future with a home of your own.