Line of Credit Effect on Credit Score

Credit scores can be affected by many factors.

Lines of credit can change a person's credit score, either for the better or for worse. Lines of credit are forms of consumer credit, and thus they impact both your credit history and the credit scores based on them

Basics

A line of credit is an unsecured loan offered to a consumer at a specific amount and interest rate. These are most commonly offered by consumer credit institutions like banks and credit unions.

Credit Scores

Credit scores are a measure of a person's creditworthiness. A high score generally means the person is considered a safe debtor, while a low score represents a risky debtor.

Calculations

Credit scores are calculated using different factors, including: payment history, amount owed, length of credit history, new credit lines and the types of credit you have.

Positive Habits

Paying back the line of credit on time, having a variety of credit lines open and keeping your overall debt level low all tend to improve your credit score.

Negative Factors

Not paying bills on time, having too many open credit accounts and having too large a debt can all bring your credit score down. All of these factors can be influenced by your line of credit, especially if you already have a lot of credit cards, make late payments, or take on too much debt.

References

• MyFICO: "What's in your FICO® score
• Bills.com: "Factors that Affect Your Credit Score"