A big question that people ask is how unsecured credit card debt affects your credit score. The answer for this is less cut and dry as you might think. To explain this, we must first look at how your credit rating is calculated and in what ways working with the debt affects these calculations.

FICO (Fair Isaac Company which created the credit scoring system) Scores are calculated from numerous different credit data in your credit profile. This data is usually grouped into five categories as defined below. The percentages in the chart indicate how important each one of the categories is in determining your FICO score.

A FICO score takes into consideration each one of these categories of information, not just a couple. No one bit of information or element alone will establish your score. The importance of any factor is dependent upon the overall information in your credit reports.

Prior to beginning a full-scale attack on one’s a bad credit score and repair of a negative credit file the person must initially target each one of the negative items and handle them. Resolution may take many forms, which we are going to explore here. From a credit score improvement or credit rebuilding standpoint the significant starting place is "closing the book" on all the bad credit items on the credit profile. A horrible but old and closed bad credit item most often gets viewed better than an open current bad credit item.

The following point one must examine is how each type of debt relief program will affect your credit score and to what degree. For many people, a given factor might be a bigger factor than for someone else with a different credit history. Additionally, as the information within your credit file changes, so does the importance of any factor in determining your FICO score. Thus, it's impossible to say just how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from individual to individual, and for any one person over time.

Paying monthly minimums

- Some people believe that their only option is to always pay their monthly minimums expecting that some day they will resolve their debt. This option will, dependant upon your interest rates, take approximately 38 years to accomplish and along the way pay 1000s of dollars in interest. While doing this option you will be affecting your debt to credit ratio which as outlined by the FICO chart above comprises thirty percent of your overall credit standing.

Bankruptcy

- Typically a bankruptcy will stay on your credit file for about ten years. It is also part of your public record for the rest of your life. Due to this lots of people feel that Bankruptcy has the longest affect against your credit rating.

Consumer Credit Counseling

- With this option a creditor has the option to mark you as being in collections or being paid by a 3rd party, indicating that you are in a Consumer Credit Counseling program for the entire amount of the program, which can be typically 5 to 6 years.

Debt Negotiations

- This may produce an initial affect on your payment history which as the chart above shows, is about 35% of your credit rating. As each account is paid and reported as a zero balance, it has a positive impact on your debt to credit ratio which accounts for 30% of your credit standing.

Your FICO score only takes into consideration information in your credit report. However, lenders examine several things when reaching a credit decision including your income, just how long you've worked at your present job and the kind of credit and length of loan you're requesting. Your score considers both good and bad information in your credit profile. Late payments will reduce your score, but establishing or re-establishing a good track record of making payments by the due date will raise your FICO credit score.