Good Credit Versus Bad Credit - Improve Your Credit Score


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Good Credit Versus Bad Credit

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Home > Improve Credit Report Articles

Do you know how your credit impacts your credit score? Did you know that there is such a thing as bad credit, which actually has an adverse effect on your score?
Ditto for debt; there is such a thing as good debt, which could actually improve your financial and credit situation.

There are some determining factors that differentiate whether credit is good, or bad. One of the easiest ways to understand good debt is to take a look at some examples:

An example of good debt is anything with a higher price tag that makes paying in cash impossible for most people, and is something that you need. A house - and its mortgage - is a prime example of taking on good debt. One the subject of mortgages, their interest rates is usually lower than those of credit cards, which are generally high interest debts. A mortgage can give you a tremendous effective credit reference.

Guess what? Financing an automobile is another good example of good credit. Just remember to shop around for good credit terms, like a low (or relatively speaking, the lowest) interest rate. If you have really damaged credit, another way to get back on your feet and reestablish good credit is to apply for a bad credit auto loan. There are many online lenders that focus on helping loan applicants with bad or no credit get guaranteed approvals, and if you make your loan payments in a timely fashion, you'll also improve your credit score.

Bad credit is considered any type of debt with a high interest rate for things that aren't necessary. Whipping out your credit card to pay for that boat, or summer vacation would be considered bad credits.

Credit cards are the worse form of bad credit debt since they carry the highest interest rate levels. It's too easy to fall into the trap of over extension with credit cards, and is the number one reason why people fall behind and end up with a bad credit score on their records.

If you want to recover from the negative impact of bad credit, there are a few things that you can do. First, if you have multiple credit cards, pay them off completely if you can. Start with the one with the highest interest rate, then move down the line with the 2nd card with the highest rate, and continue until you've paid them all off.

It you take the steps to pay off your credit cards, you'll be back on the road to establishing a good credit score. By the way, what's considered a good credit score may differ between credit reporting agencies, but a credit score 680 -700 range is considered good; an excellent credit score 700 - 720 range is just about as good as it gets.

So there you go. Good credit debt are necessary purchases - if you make your payments on time, you'll improve your credit rating, so by all means, learn to harness the power of good credit debt. On the other hand, bad credit debts aren't necessary purchases - and can too easily lead to financial hardship down the road. Steer clear from bad credit debt as diligently as you can.

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