Amount owed on accounts determines 30% of a FICO Score
Owing money on credit accounts doesn't necessarily mean you're a high-risk borrower with a low FICO® Score.
However, when a high percentage of a person's available credit is been used, this can indicate that a person is overextended,
and is more likely to make late or missed payments.
Part of the science of scoring is determining how much is too much for a given credit profile. Your FICO Scores take into account several factors.
The amount owed on all accounts
Note that even if you pay off your credit cards in full each month, your credit report may show a balance on those cards.
The total balance on your last statement is generally the amount that will show in your credit report.
The amount owed on different types of accounts
In addition to the overall amount you owe, your FICO® Scores consider the amount you owe on specific types of accounts,
such as credit cards and installment loans.
Whether you're showing an amount owed on certain types of accounts
In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly,
and may be slightly better than carrying no balance at all. Having a low credit utilization ratio can be better than having a high one, or none at all.
For example, closing unused credit accounts that have zero balances and are in good standing will not raise your FICO® Scores.
How many accounts have balances
A larger number of accounts with amounts owed can indicate higher risk of over-extension.
How much of the total credit line is being used and other "revolving" credit accounts
Someone who is close to "maxing out" several credit cards has a high credit utilization ratio and may have trouble making payments in the future.
How much of the installment loan amounts is still owed, compared with the original loan amount
For example, if you borrowed $10,000 to buy a car and you have paid back $2,000, you still owe (with interest) more than 80% of the original loan.
Paying down installment loans is a good sign that you're able and willing to manage and repay debt.
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The Score That Matters®
FICO Scores are the standard credit score in the US, used in more than 90% of lending decisions.