What can be a consequence of having too much debt?

Having too much debt can lead to potential reduction of credit score. Credit scores are calculated based on various factors, including payment history, amounts owed, length of credit history, types of credit, and new credit inquiries. When an individual accumulates excessive debt, it can negatively impact their credit utilization ratio, which is the amount of credit used compared to the total amount available. A high utilization ratio suggests to lenders that a borrower may be overextended financially, prompting concern about their ability to repay future debts.

Additionally, missed or late payments due to high debt levels can further damage a credit score. Lenders view a low credit score as a risk factor, which can result in higher interest rates and more difficult borrowing conditions. In contrast, options like access to multiple credit card offers and opportunities for refinancing generally reflect a healthier credit situation, not one burdened by excessive debt.