Debt can affect your creditworthiness, either positively or negatively. If you manage your debt well, you’ll have a clean record that will act as insurance to secure a loan facility. Most lenders such as credit card companies, banks, licensed money lenders, and insurance companies rely on your debt history before deciding on the amount to advance you and the interest to apply on your loan. Your debt history shows how responsible you are in finance management. Below are five debt characteristics that affect credit.

Payment History

When a lender is giving you a loan, they always have one question in mind. “Will the loan be paid back?” This is usually the fear of many lenders, as cases of default have been experienced before. Your debt history forms a basis for determining if you are credit-worthy.

Amount Owed

Your outstanding loans also determine your creditworthiness. You could be paying all your loans religiously, but your income cannot be committed further. The amount of outstanding loans is compared with your credit limit to determine the much you can borrow.

Length of Credit History

Most lenders will always look back at the length of your credit history. They’ll be seeking answers to questions such as. How many years have you had these obligations? When did you get your first loan, and how long did it take you to clear. A long debt history is useful as long as it is not marred with late payments, default, and other negative items. A short debt history is also fine, as long as the payments are made on time, and the volume of outstanding loans is kept low. This is the reason why it is advisable to keep your credit card open even when not in use, as the account age improves your creditworthiness.

New Credit

Lenders prefer borrowers with few new accounts as compared to borrowers with many new accounts. The assumption is a borrower with many new accounts may be struggling with finance management. They have been considered high-risk customers, and their creditworthiness is questionable. On the contrary, somebody with a few new accounts doesn’t raise eyebrows and accesses a loan facility very fast.

Types of Credit in Use

Lenders will always be looking for the number and types of loans that you hold. They are interested in the mixture of loans that you hold. For instance, if you hold a mixture of loans that totals to a very huge outstanding amount, your credit wornness also goes down. Nobody would be willing to advance a loan to a person who is buried in debts.


Your credit score is extremely important when accessing any credit facility and getting the best loan terms, such as low-interest rates and prolonged loan tenure. But it doesn’t mean that you get obsessed with the credit score guidelines to achieve the scores that any lenders want to see. If you just manage your loans responsibly, you can be sure your score will shine.