If you feel like you’re drowning in debt, it’s important to remember that not all debt is bad and, if done correctly, can actually improve your credit score.
Your credit score is an incredibly important number in your life. It can make or break something as huge as a mortgage application to something as small as a credit card application. Your credit score is more or less determined by your ability to pay off your debts: if you pay them on time, it goes up. If you don’t pay them, it goes down. Debt is either secured or unsecured, and knowing how your loans work can help improve your credit score.
- Student Loans
Millennials are experiencing student debt by factors unseen before in human history. They’re not bad for your credit score if you pay your bills on time. Because they often take decades to pay off, they can actually help your credit score. These loans are unsecured because the bank can’t reclaim the knowledge you gained at school. - Existing Mortgage Loans
Mortgages are the number one example of secured debt because the bank has the ultimate–”your” home. When mortgages are paid on time, they are great for your credit score. Missed payments, however, will hinder your score and make new lenders a little nervous about the risk they’re taking with you. - Auto Loans
Car loans are another form of secured debt–if you miss your car payments, the bank can always repossess it. Auto loans are harder to get than credit cards, so, if you’re paying your car on time, some lenders may look favorably on that.
Mortgage lenders look for a good credit score before they give hundreds of thousands of dollars to anyone. For all of your home buying needs throughout the Solana Beach, California area, contact the professionals at Ranch & Coast Mortgage Group Inc.
