The ship has sailed on some of these, but watch out for the ones that you can control in the future!
Different types of debt can boost your credit score — but over-borrowing can hurt you.
Want to get a new mortgage? Then your credit score is a really big deal — it can make or break your mortgage approval, and ultimately determine whether you get the house you want. But before we talk about credit scores, let’s talk about the debt that affects them.
There are two types of debt: secured and unsecured. When you borrow money to buy a house, the bank can take back the house to recoup its money if you don’t pay the debt. That means the debt is secured — it’s balanced against something you want to keep and gives the bank some measure of security that it’ll be able to recover the money it loaned you. Unsecured debt, on the other hand, means the bank can’t reclaim the thing you’re buying with the borrowed money. (Credit card debt is unsecured and so are student loans.)
Let’s look at the impact of four key consumer loans, a mix of secure and unsecured debt, on your credit score — and ultimately your mortgage-worthiness.
- Student loans
- Auto loans
- Payday loans
- Existing mortgage loans
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