Build Up Credit through Good Debt with Aid from a 4 Pillars Consultant

As you try to pay down debt through the different restructuring options available, your credit rating might take a significant dive. If you are planning to make major purchases in the future, this might cause some concern. Lenders are more reluctant to approve loans if you have poor credit. However, with some help from a debt relief specialist from 4 Pillars in Victoria, Nanaimo, Port Alberni, or Courtenay, you can slowly build your credit back up. You can start with accruing good debt.

What Is Considered Good Debt?

 

Often, people view debt as something negative, but not all debt is bad. There are actually some types of debt that affect your credit rating in a positive way. Good debt is debt acquired for something that will increase in value and improve your life in some manner.

A mortgage, for example, is considered good debt because it’s an investment that sees a huge return. Taking a loan on a house or an investment property can help you become more financially stable. A mortgage comes with a lower interest rate, and by the end of it, you won’t need to pay more and just continue living there. In the case of investment properties, the costs are usually covered by rent money from tenants.

If you have plans to be an entrepreneur, business loans are also ideal for rebuilding credit. Starting a business is a solid investment that could be worth more in the future than the loan you took. Of course, you will need to have skills, a compelling business plan and ideas for quality products or services to be approved first.

Other examples of good debt include student loans, secured lines of credit, and personal loans.

 

How Can You Avoid Bad Debt?

Part of rebuilding credit is making sure that you don’t take on even more bad debt. To avoid this, you must first learn what kinds of debt are bad. Generally, any “unsecured” or “consumer” debt is considered bad because you’re spending money on something that doesn’t generate any additional value.

If you have an unsecured credit card, you don’t necessarily have to avoid using it. Responsible spending can actually help you regain a healthy credit score. Just make sure that you don’t go over your limit and pay the bills on time and in full.

You might also want to hold off on buying a new car as auto loans can be bad debts. It’s a widely known fact that cars lose value as soon as you drive them off the seller’s lot. The more you use it, the more it depreciates in value. Although owning a car is a necessity, the high interest rates and fast value depreciation will not do you any good at this point.

Learning how you can rebuild your credit without further damaging your financial credibility is easy if you are an informed consumer. 4 Pillars debt advocates can help you through credit education.