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How does debt affect your credit score?

Managing debt well could help grow your credit score. But there are things to keep in mind.

Dan | Brand and Communications Executive | 3 min read | 1 September 2026

In short . . .

Debt isn’t necessarily a bad thing and handling it well can positively affect your score. But missed payments will have the opposite effect.

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What's in this article

Does debt lower your credit score?Why checking your credit report matters

Some people assume all debt is ‘bad’, but that’s not true. It’s simply a word for the money you’ve borrowed and owe a lender. This can include anything from a phone contract to opting to pay for something in instalments via a Buy Now, Pay Later arrangement.

But how you manage debt can influence your credit score. And while some debts may seem small and fleeting, others can have a longer-lasting impact. Understanding the difference can help you feel more in control of your credit health.

Let’s walk through the ways different types of debt can show up on your credit report, how long they could affect you, and what you can do to stay on top of your credit health.

Does debt lower your credit score?

Not all debt harms your credit score. In fact, borrowing and repaying on time can help build a positive credit history over time.

What tends to lower scores is when debt becomes difficult to manage – for example, if payments are missed, accounts fall into arrears, or lenders take further action like registering a default or passing the debt to a collection agency.

Key factors lenders look at include:

Whether you pay on time.
How much of your available credit you’re using.
How long accounts have been in good standing.
Whether you have any negative markers on your credit report.

When you apply for credit, the lender will do a hard search of your credit report. This is a full look of the information on your report and could cause your credit score to dip – but it should only be temporary. Hard searches will show on your report for 12-24 months, and lenders can see them but not the outcome of your application. This is why too many in a short space of time could lower your score and impact an application, because lenders may think you’re taking on a lot of debt at once and may struggle to pay them back. Using too much of your available credit limit can also lower your credit score and influence a lender’s decision. They could see this as a sign you’re overly reliant on credit and could therefore find it difficult to pay them back.

Why checking your credit report matters

Your credit report is a record of how you’ve managed debt – and that’s what lenders see.

By checking your report regularly, you can:

Make sure accounts are reflected correctly (for example, as settled if you’ve paid them).
Spot any errors or outdated information and take steps to putting things right.
Understand what’s influencing your credit score.
See what lenders might see before you apply for new credit.

At Checkmyfile, we put your information from the UK’s three main credit reference agencies – Experian, Equifax, and TransUnion – in one place. It’s the most detailed credit report you can get. And if you spot something that doesn’t look right, our UK-based customer care team can help. Start with a 7-day free trial, then it’s £14.99 a month. Cancel online anytime.

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Author

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Dan

Dan is Brand and Communications Executive at Checkmyfile. He’s been part of the Marketing team for two years and has a background in copywriting, journalism, digital marketing, SEO, and PR.

Published

Updated

1 September 2026

Reviewed by

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Olivia

Product Analyst

FAQ

In the UK, student loans don’t appear on your credit report at all. Repayments are usually taken automatically through the tax system once you earn above a certain threshold. They don’t show as a typical credit account and don’t influence your credit score.
But lenders may still ask about student loan repayments when assessing affordability for things like mortgages. So while it doesn’t damage your score, it can still play a role in the outcome of credit applications.
A Debt Management Plan (DMP) is an informal arrangement to pay back debts at a more affordable rate. It can affect your score, but not because of the plan itself.
Instead, it’s the missed or reduced payments leading up to and any during the plan that can be recorded on your credit report. Lenders may mark accounts as being in arrears or default, which can lower your score.
These markers typically stay on your credit report for six years from the date they’re recorded.
Debt consolidation is when you combine multiple debts into one new loan or credit card.
In the short term, it could affect your score. Applying for new credit usually involves a hard search, which may cause a small, temporary dip in your score. If you close old accounts or shift balances around, that can also change how lenders view your credit usage.
Removing an old account with good payment history could lower your score, because you’re essentially getting rid of evidence of having handled credit well in the past.