Your credit score plays a critical role in your financial health. It affects everything from the interest rates you’re offered on loans to whether you can rent an apartment or get approved for a mortgage. In 2025, understanding how to manage your debt and improve your credit score is essential for achieving long-term financial stability.

In this blog, we’ll explore a credit score, how it’s calculated, and how you can improve it by managing your debt effectively.

What is a Credit Score?

A credit score numerically represents your creditworthiness, ranging from 300 to 900. Lenders use it to determine how risky it is to lend money to you. The higher your credit score, the less risky you appear to lenders, which means you’ll likely receive better interest rates and more favorable terms on loans.

Your credit score is calculated based on several factors:

• Payment History (35%): Whether you’ve paid your bills on time.
• Credit Utilization (30%): The ratio of your credit card balances to your credit limits.
• Length of Credit History (15%): How long you’ve been using credit.
• Types of Credit Used (10%): The different kinds of credit accounts you have, such as credit cards, mortgages, or installment loans.
• New Credit (10%): The number of recent inquiries or new credit accounts you’ve opened.

How Debt Affects Your Credit Score

Debt plays a significant role in determining your credit score. Here’s how different types of debt affect your score:

• Credit Card Debt: High credit card balances can negatively impact your credit score by increasing your credit utilization ratio. It’s ideal to keep your balances below 30% of your credit limit to maintain a healthy credit score.
• Personal Loans: Personal loans can help diversify your credit mix, which can improve your score. However, if you miss payments or carry high balances, it can hurt your credit score.
• Missed Payments: The most significant factor in your credit score is your payment history. Missing payments on any type of debt will significantly lower your score.
• Bankruptcies and Collections: Bankruptcies and accounts sent to collections can severely damage your credit score, and it can take years to recover from these negative marks.

How to Improve Your Credit Score in 2025

• Pay Your Bills on Time
  The most important thing you can do to improve your credit score is to pay your bills on time. Set up automatic payments or reminders to ensure you never miss a due date.
• Reduce Your Credit Card Balances
  If you carry high balances on your credit cards, focus on paying them down. The lower your balances, the better your credit utilization ratio will be, which will improve your score.
• Avoid Opening Too Many New Accounts
  Every time you open a new credit account, it results in a hard inquiry on your credit report, which can temporarily lower your score. Only open new accounts when necessary.
• Consider Debt Consolidation
  If you have multiple debts, consolidating them into one loan with a lower interest rate can simplify your payments and help you pay down debt faster.
• Review Your Credit Report
  Regularly check your credit report for any errors or inaccuracies. If you find any, dispute them with the credit reporting agency to ensure your score is accurate.

The Role of a Licensed Insolvency Trustee in Managing Debt

If you’re struggling with debt and finding it difficult to improve your credit score, a Licensed Insolvency Trustee (LIT) can help. An LIT is a professional who can guide you through debt solutions such as Consumer Proposals and Bankruptcy Protection. They’ll work with you to develop a plan that suits your financial situation, helping you regain control and rebuild your credit over time.

Contact Morataya Corp Today for Expert Debt Solutions

If you're ready to take control of your debt and improve your credit score in 2025, Morataya Corp is here to help. Our Licensed Insolvency Trustees specialize in providing personalized debt relief solutions that can help you build a better financial future.

Contact us today for a free consultation and start your journey towards financial freedom and a stronger credit score!