Having too much debt generates short-term and long-term ramifications for a borrower. In the near future the person will have to deal with high interest payments, which actually means that they will have less money to maintain their lifestyle. But borrowing too much money has other consequences such as reducing your credit rating, increasing the difficulty to obtaining new lines of credit, and augmenting the difficulty to finding a new job.
Perhaps the most evident effect of borrowing too much is the higher amount of money that is due to lenders. The more money an individual owes the higher the interest rate they will have to pay. All this extra money could be used for other purposes such as retirement projects or financing kids’ education.
Another impact of heavy debt is the reduction of your credit score. Unlike what most people think, borrowing too much does not only hurt their wallet. Effectively, when the debt amount of an individual rises above a certain level, it is reported to credit bureaus. A credit bureau will compare the income of the individual to their debt to see whether the financial obligations can be met with the actual salary. If the income of the individual remains stagnant or if its increase does not proportionally keep up with the debt increase, then the debt-to-income ratio will also go up. Since credit ratings are directly related to this ratio, any increase in the debt-to-income ratio causes a reduction of the credit rating. So to the question: Does Too Much Debt Affect My Credit? The answer is yes.
A decrease in the credit rating makes it harder to secure a new line of credit. Indeed, most loan officers and credit card firms will refuse to take the risk to lending additional money to a person who is already buried under debt.
Finally, having too much debt can cause a person to fail to land a job. Many companies use credit ratings as a way to foresee the future trustworthiness of candidates as workers. If an employer sees that a job applicant has a heavy debt load on their record, then they could see this as a sign that the applicant shall not be able to correctly handle the resources of the company.