If you feel like you’re drowning in debt, remember that not all loans are necessarily a bad thing—you can use them to prove you’re capable of making timely payments.
Different types of debt can actually boost your credit score, but overdoing it can, and will, hurt you. When you’re shopping for a mortgage, your credit score is the talk of the town. It can make or break your application and ultimately determine whether or not you’re going to get the home you’ve always dreamed out. There’s a lot of power within those three digits. The following consumer loans affect your mortgage worthiness in different ways. Here are some steps you can take to improve your credit if you have these loans, so you can qualify the best possible mortgage.
- Student Loans
Student loans are unsecured debt, but they won’t harm you if you pay your bills on time. Because they take decades to pay off, student loans can actually help your score. Student loans will figure into your overall debt-to-income ratio, but a large student loan you consistently pay might help you qualify for a mortgage.
- Auto Loans
Auto loans are secured debt, because the lender can always repossess the car if you don’t pay. In some cases, auto loans can help your credit score by raising your score since you’ve diversified the types of debt you carry. Because auto loans are easier to acquire than credit cards, mortgage lenders may look favorably on you because you’ve already qualified for a car loan.
- Existing Mortgage Loans
Mortgages are the classic example of secured debt because the bank actually owns your house, thus, has the ultimate collateral. When paid on time, mortgages are great for your credit score. A missed payment on previous mortgages, however, will wave a red flag to your potential lenders.
Loans don’t have to be the life-sucking entities you fear! Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.