These days, having a good credit score means a lot. If you have bad credit, your chances of getting a nice house or car are very slim to none unless you are paying cash, but if you have that much cash your bills would have been paid on time, right? If you are among the millions of people with bad credit, then the information I am about to give you should be of some value to you, and you are probably well aware of how important your credit score is. Most people associate debt with being a bad thing, but there is good and bad debt.
A mortgage is an example of good debt because your house will generally increase in value over time unless you do not take care of it and make the necessary improvements to it when they are needed, like painting it every few years and replacing the roof when needed, etc. There will be times when the value of your house will decrease, but if you live in your home for the thirty years that you have your mortgage, your home will be worth more than it was when you bought it.
A student loan or loans is another example of good debt because you used the loan to pay for the education that got you the job that pays a lot more than you would have made if you had not went to college. Once you pay off your loans, the money that you are making is yours. In general, if you have a debt that was used to either pay for something that helps you increase your income or it directly increases your income, it is considered good debt.
A credit card with a high interest rate is an example of bad debt. Having a credit card is a good thing, but it should only be used when the balance can be paid off before the end of the billing cycle to avoid the interest. If you need to use it for an emergency such as car repairs or a major home repair, be sure to pay it off as quickly as possible. Many people go deeply into debt because they use their credit cards when they should not be spending money and before they know it, their card is maxed out and they have no way of paying down the balance quickly enough.
Some types of car loans can be considered bad debt also, depending on how the car loan helps you increase your income. Getting a car to make it back and forth to work is a good debt, but getting the flashiest car on the lot when a car less than half of the cost of the flashy one will do is bad debt. If you need a car for transportation then you should get one, but consider things like how nice of a car you actually need versus how nice of a car you want and how good the car is on gas and how costly the repairs and maintenance are. These are all things to consider when deciding on the type of car to get. If you want a really nice car and you have enough income to pay the loan, but you have a lot of other debt that is driving your credit score down which results in higher interest rates, get the cheaper car and straighten out some of your other debt. Once you get your credit score down, you will be able to buy a nicer car with a lower interest rate.
The subject of credit scores and debt can be confusing to some people, but if you only have debt that you need, such as a house and a car and a credit card or two, you will be on your way to a better credit score. Just remember to pay your payments on time.