When you read your credit reports, you are going to be able to see a lot of different information about your financial situation. One of the most important parts of the credit report is the section that covers your amount of debt. Here are a few things to consider about the importance of your amount of debt on your credit report.
One section of your credit report is going to be dedicated to your current balances. This means that the section is going to outline all of the different accounts that you have. You are going to be able to see the names of the lenders, your account numbers, your current balances, and whether or not you are current on your accounts. This section allows you to see exactly how much money you owe in the form of debt. There will be many different types of accounts and debts on most people's credit report. Looking at this section is going to give you a good snapshot of where you are when it comes to dealing with your debt.
One of the types of accounts that will be listed here is any installment debt that you have. Installment debt is a type of loan that you make installment payments on. For example, if you have an auto loan, this is referred to as installment debt. You are borrowing a certain amount of money and you are making monthly payments to retire the balance.
Revolving debt is another common type of debt that will show up on this portion of the credit report. Revolving debt basically refers to credit cards and store accounts. This is a type of debt that you accumulate over the course of the month and you are not required to pay off the full balance at the end of the month. You are allowed to leave the balances on your card and pay only a minimum payment if you want. This type of debt usually has very high interest rates attached to it.
Another type of debt is referred to as open debt. This is a type of debt that is allowed to accrue over the course of a month. However, with this type of debt, you have to make sure that it is paid off at the end of the month. A common example of open debt is a cell phone bill.
At the end of this section, you will see what your aggregate debt is. This means that there is going to be a total of all of your debt accounts. When lenders are trying to make a lending decision about you, they are going to look at your aggregate debt in order to help them decide.
Number of Accounts
On this part of the credit reports, creditors are also going to look at the number of accounts that you have balances on. They typically do not like to see many accounts with balances.