What debts can affect your credit rating?
When applying for any type of credit from a financial institution it’s very likely that they will check on your credit file. Your credit rating is a summation or footprint of your past credit history and your credit score can often positively or negatively affect the outcome of credit products in terms of interest rates, offers or even approval or denial of services. There are a number of positive debts that can affect your credit score as well as some negative debts that can heavily impact your credit score. Here are some of the top debts that affect your credit rating positively and negatively:
Auto Loans: getting approved for an auto loan and paying it regularly is an example of a debt that positively affects your credit rating. Pay as much is possible up front to avoid high interest monthly payments and then continue to pay on scheduled monthly increments for a fantastic boost to your credit rating.
A mortgage: A mortgage is a low-interest loan that can provide you with an excellent boost to your credit rating. If you’re approved for a home loan, you can see a continuous improvement for your credit rating as long as you continue to pay down the loan on time.
Student debts: taking out a student loan and then paying it down can be an excellent reflection for your credit rating. These are low interest loans and they can carry an excellent boost for your credit.
Financing depreciating items: putting large depreciating items on a credit cards such as a luxury pair of shoes is considered a negative debt. During the balance for depreciating item for years could cost you a ton of money and act as a huge deficit to your credit if you can’t pay it off quickly.
Cash advance loans or payday loans are some of the worst types of debt. These are essentially personal checks that come with large leaves from the organizations that issue them. These debts can negatively affect your credit score because they incur a large amount of interest over time and can grow difficult to pay if they are not taken care of immediately. If you decide to roll over these debts the interest rates on payday loans could grow to nearly 300% annually with ongoing processing fees for rolling over the loan.
Consider some of these top debts and remember what can quickly affect your credit rating in a negative way before you make an impulse financial decision!