Credit Debt: Good Credit or Bad Credit

A debt-free life is near impossible in this world today and it is important to know both sides of credit debt.

Credit debt is not always a bad thing.   

In some cases good credit debt can be helpful to your financial situation.  Knowing the difference between good credit debt and bad credit debt is important.  Good credit debt and bad credit debt will affect every loan possibility you come across within your life.  Whether or not you get a good interest rate will be determined by your credit debt and your credit score.  In some cases good credit debt or bad credit debt could be the deciding factor in some job opportunities that you may apply for.  

How do you know if you have good credit debt?  Good credit debt will include anything that you need but is too expensive to pay cash for.  A home mortgage is an example of good credit debt.  Another example of good debt is financing a car loan.  In any type of loan make sure to shop around for the lowest interest rates you can find. 

A mortgage is a great way of helping you receive excellent credit if you keep your monthly payment within your budget and pay your bills on time.  Often mortgages have lower interest rates than high interest debt.  Credit cards are considered an example of a high interest debt.

You can increase your credit score rating by having good debt and making your payments on time.  A good credit score rating allows you to get lower interest rates when taking out loans which save you money.  Sometimes taking out a home equity loan makes sense to pay for a car because the interest rate is lower than an auto loan and the interest is tax deductible.

What is considered bad credit debt?  Bad credit debt is merely anything with a high interest rate on things that you really do not need.  Say you take a vacation even though you really cannot afford to go on vacation.  You put all your expenses on your credit card, this would be an example of bad credit debt.  

When owning a credit card you must remember to use your credit card for your benefit.  Research what you should and should not put on your credit card.  Make sure to know your good credit debt and bad credit debt as this is crucial to have good financials.  The reason the worst type of bad credit debt is credit cards is because credit cards carry higher interest rates.  Credit card debt is also the path most people take when they stumble into bad credit debt.

If you have bad credit debts don’t give up!  There are ways to recuperate.  The smartest way to get back on your feet is to pay your credit card debt down or pay it off.  You should pay your highest interest rate credit card off first and work your way down.

Another way to acquire bad credit debt is by not paying your bills on time or by not paying your bills at all.   Once your credit score rating is affected by your bad financial habits, your financials will be hurt drastically.  You will face higher interest rates and bad credit scores until you repair what you destroyed.  You will face not being able to qualify for loans, credit cards, or even might keep you from your dream job.  It will take a long time to get back where you were, but with time, diligence, determination, and a good plan you can make it through.