Q: How does credit card debt affect my credit report?

A: One of the major factors used in determining your credit score is your outstanding debt vs. your available credit. For example, if you had $6,000 in credit card debt, but the total available credit on your credit cards was $12,000, then your ratio would be 50%. However, if you had $6,000 in credit card debt on cards with only $7,000 in total credit, then your ratio would be 85%, and that's bad.

With this in mind, it's important to recognize that it's normally a bad idea to close one of your credit card accounts. It's far better to leave the account open, but pay down the balance to $0. That way, your total debt used vs. available credit will be lower, thus making your credit score higher.

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Please Note: Unsecured debts are debts such as credit cards, personal loans, lines of credit, store cards, medical bills, and utility bills that are not secured by collateral. Mortgages and car loans are NOT considered unsecured debt.
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