Good vs. Bad Credit Debt

Do you know the difference between good and bad credit debt? Most everyone seems to think that all debt is bad, but that is not always the case. In fact, there are some instances where good debt can actually help your financial situation.

The differences between good debt and bad credit debt will affect every loan you get and can even make the difference in getting a new job. Here are a few examples of what determines good debt vs. bad credit debt.

Good Debt

Good debt includes anything that is too expensive to pay cash for but is still something you need. Buying a home is an example of taking on good debt because you need a place to live.

Most mortgages have lower interest rates compared to high interest debt like credit cards. As long as your monthly payment is within your budget, a mortgage gives you an excellent credit reference.

Financing a car is another example of good debt especially if you plan to drive it after your loan payments have stopped. The key thing to remember is shop for the lowest interest rate possible.

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.

Having good debt and making payments on time gives you a good credit rating. That good rating allows you to borrow more money at better interest rates and can possibly help your financial position.

Bad Credit Debt

Bad credit debt is any form of debt with a high interest rate for things you really don't need. An example would be to charge an expensive vacation on a credit card that you can't really afford.

The worst form of bad credit debt is credit card debt because it carries the highest interest rates. It's easy to over extend yourself with credit cards and it is by far the way most people acquire bad credit debt.

The quickest way to recover from bad credit debt is to pay credit card debt down or pay it off completely. The best way to pay credit card debt down is start with the highest interest rate card first. Then, pay on the debt with the next highest rate until you have paid off all of your credit card debt.

Bad credit debt can also happen if you are continually late on paying back borrowed money or you don't pay it back at all. Once your credit rating is affected in a negative way, it will hurt you financially.

Bad credit debt can keep you from qualifying for loans, credit cards and may even hurt your chance for new employment. Even if you could qualify for a loan, it would be at a higher interest rate than if you had good credit.

The smartest thing you can do is to pay your credit card debt off as quickly as possible to avoid paying the high interest. While good debt will help you financially, bad credit debt will have the opposite affect.

In today's world it's next to impossible to live debt-free so it's important to know the difference between good and bad credit debt.

Copyright © 2005 Credit Repair Facts.com All Rights Reserved.

This article is supplied by http://www.credit-repair-facts.com where you will find credit information, debt elimination programs and informative articles that give you the knowledge to correct your own credit and credit report. For more credit related articles like these go to: http://www.credit-repair-facts.com/article s_1.html

---

Balance Transfers Introduction

Credit card balance transfer involves using a credit... Read More

Ways to Look Good without Selling Your Soul to the Credit Card Sharks

1. Buy clothes at thrift stores. BEFORE you buy them,... Read More

Credit Cards: How To Use Them

Credit cards can be a very quick way of getting... Read More

Common Credit Score Myths

A lot of credit score myths about fico score ratings... Read More

Credit Help for Real Estate Financing: Five Categories of Your Credit Score

1. Payment History -- 35%The number of accounts paid as... Read More

Credit and Loan Help for Mortgage Loans

Mortgage loans are some of the most difficult loans to... Read More

What Does Your Credit Score Tell You?

When you apply for a loan or a mortgage, the... Read More

Dont Fall for Credit Repair Scams

We've all seen the ads on television or in magazines,... Read More

How To Boost Your Credit Score

Years ago your credit score was a big secret, known... Read More

ChexSystems: Who They Are and How it Affects You

ChexSystems is a company that maintains a subscriber membership service... Read More

Minimize your Risk for Identity Theft

Identity theft is the fastest growing crime in America. According... Read More

What To Look For In A Credit Card

When you are deciding what type of credit card to... Read More

Choosing the Best Low Interest Credit Card

With so many low interest credit cards on offer, how... Read More

Credit Verus Debt

Secured and unsecured debt - what's the difference?It's easy to... Read More

Credit Card Traps: How To Spot Them On The Spot!

They arrive in your mail - a conspicuous looking mail... Read More

Good Credit Is a Necessity for Everyday Living

Most of us want a good credit report to obtain... Read More

Finding and Applying for the Right Credit Card Offer Online

Anywhere you go online nowadays, you will see a multitude... Read More

What You Should Know About Credit Counseling

Credit counseling is a free service that many people with... Read More

Building Business Credit

Most businesses want to be able to borrow money when... Read More

Credit Problems? Heres How to Manage Your Creditors

If you find that creditors are calling you almost daily... Read More

Special Credit Information for Married Couples

If you are married, establish separate credit accounts.Try to finance... Read More

Bad Debt Recovery

Bad Debt IdentificationIdentifying bad debt is not as easy as... Read More

What Are the Most Common Ways to Commit Identity Theft or Fraud?

It's the number one source of consumer complaints at the... Read More

Credit Cards, Merchant Accounts, and Your Bottomline

Q: I'm opening a gift shop and want to be... Read More

Five Debt Negotiation Facts

These five debt negotiation facts along with a few debt... Read More

Credit Cards Can Help You Get Out Of Debt

Your credit rating / credit score is based upon how... Read More

Credit cards

If gold medals were awarded for marketing consistency, the credit... Read More

Defeating Credit Card Debt With Self Control

Credit card debt is a major social problem in some... Read More

Good Credit Is Not A Good Reason To Borrow More Money After Youve Achieved Financial Freedom

The most important thing for you to remember is that... Read More

My Credit Card Application Was Rejected! Now What?!?

No doubt, you've probably gotten literally hundreds of credit card... Read More

Finding the Right Credit Card

There are so many credit cards out there to choose... Read More

Credit and Its Cost

What is Credit? Credit is money granted by a lender... Read More

Choosing a Credit Counseling Company

If you have considered credit counseling as an option to... Read More