In general, debt is good for your credit, but only to an extent. Having too many lines of credit or too much debt on any one particular credit line is detrimental to your credit. The line between debt and a good credit score is fine, one that requires much focus and attention. Since the debt–credit balance is so volatile, and yet so important, it is easy to see why so many people end up in trouble quickly.
The good thing about your debt is that you can reduce it, resulting in an improvement to your credit and you may not even need the help of credit negotiations. However, this take purpose and financial focus.
If you have yet to reduce your debt load, that should be your main focus for boosting your credit. It is important that you reduce your debt-to-limit ratio on your open credit lines by making timely payments. If you can’t pay down your debts all at once, don’t worry. Pay the minimum on all but one credit line and pay as much as you can on the one until the debt is reduced. Follow this pattern on all of your credit lines until they have either been paid off or reduced.
In general, your debt should not exceed 30 percent of your total credit allowance. For example, your total debt balance should not exceed $3,000 on a line of credit with a limit of $10,000. Keeping a low debt-to-limit ratio improves your credit score. It is not necessary to pay off all of your credit lines to boost your score. In fact, having a few paid off accounts that remain open and a few accounts with a 30 percent or less total debt-to -limit ratio is the best combination. The idea is to show creditors that you have the ability to pay off accounts and also maintain manageable balances on accounts.