If you think you’re drowning in debt, remember that not all debts are detrimental to your mortgage and you can actually use them to increase your credit score.
When you’re shopping for a mortgage, credit score plays a major role in your process. Your credit score can actually make or break your mortgage approval and ultimately determine if you’ll be getting that home you’ve had your eyes on for the past month. But before you check your credit score, it’s important to look at how your existing debt can affect that score. Debt comes in two flavors: secured, and unsecured. Do you know what credit you have? Here are loans that affect the worthiness of your mortgage.
- Auto Loans: Auto loans are secured debt because the lender can always repossess the car if you fail to pay. In some cases, auto loans can increase your credit score because it adds diversity to the number of loans you carry; auto loans are harder to get than credit card loans, so lenders may look favorably upon you.
- Existing Mortgage Loans: Mortgages are the classic example of the secured debt because the bank has the ultimate collateral: “your” house. When mortgages are paid on time, they are great for your credit score. Miss payments and your lenders may see a little red flag if you apply for a new mortgage.
- Student Loans: These are unsecured loans because lenders can’t suck out the knowledge you gained during your years in college–it’s (hopefully) in there to stay. Because they often take decades to pay off, student loans can actually help your credit score.
The debts you carry may actually be helpful to your credit score, and increase your chances of being accepted for your mortgage. For all of your home buying needs throughout the Solana Beach, California area, contact the professionals at Ranch & Coast Mortgage Group Inc.
