 TITLE: Knowing What Debts to Avoid When Managing Your Finances CONTENT: How Bad Debt Affects Your Credit\n--------------------------------\nAside from wreaking havoc with your budget, bad debt can hurt your credit score in a couple of ways. First, it may increase your credit utilization rate, which is how much of your available revolving credit you're using relative to your total credit limits. You should keep your credit utilization rate under 30%, or in single digits for the best scores. If you have a lot of bad debt, you're probably using more than 30% of your available credit, which can hurt your credit score.\nBad debt also can affect your credit score if the debt becomes seriously past due. If your grace period is over and you still haven't made a payment, the debt is considered delinquent and the creditor might send it to collections. They'll either turn it over to an internal collections department or sell it to a collections agency to try to collect payment from you. Since paying your bills even a few days late can hurt your credit score, you can imagine how much damage having a debt go to collections can do. Debt in collections leaves a lasting impact: It can stay on your credit report for as much as seven years from the date the debt first became delinquent. END