How to Improve Your Credit Score By Rethinking What Debt Is

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Debt. It’s a word that easily conjures fear in people. Especially when we’re talking about things like a credit score, when we know that paying off debt is one of the pillars to creating an excellent one. But debt isn’t necessarily a bad thing. Or perhaps, a better way of putting it: Debt has its benefits.

See: Want an 800 Credit Score in 2023? LendingTree Analyzed How To Do It
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Let’s get to the bottom of a couple common misconceptions about debt that are only potentially hindering your journey to an exceptional credit score

People with 800 Credit Scores and Above Have No Debt: Wrong 

According to a recent study by online lending marketplace LendingTree, which analyzed the anonymized credit reports of 100,000 Americans with credit scores of at least 800, those with 800-plus credit scores have an average of $150,270 in debt, including mortgages. These folks are making average monthly payments of $1,556. 

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Amounts owed account for 30% of consumers’ credit scores. This means that debt – that scare, flashing red number — makes up 30% of that 800+ credit score. What matters here isn’t the absence of debt, but the fact that those with debt are maintaining it by paying it off in a reasonable and timely manner. It’s not getting out of hand. It is being managed. LendingTree’s analysis found that those with debt who have 800-and-above credit scores are paying their bills on time, every time. 

All Debt Is Created Equal: Wrong 

So you have a mortgage plus some student loan debt plus some credit card debt plus that brand new car in the driveway with the steep new loan? All the same, right? Wrong? All debt is not created equal. And here, one must practice great caution and vigilance. If they don’t, their credit score could suffer. 

Credit card debt is by far the worst kind of debt one can carry because it is typically very high interest. Meanwhile, it sports low minimum payments, which gives it nothing to do but rise. Additionally, unlike student loan debt, which sports a degree, or mortgage debt which comes with a home, there’s no real asset tied to credit card debt. The best you got was a short-lived spending spree. 

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In all, the key to debt is being able to manage it and pay it down steadily and reliably. And if you need to know the difference between good debt and bad debt, ask yourself these questions: “Is it affordable? Will it help me achieve my financial goals? Does it have possible tax advantages?” If the answers are all yes, that’s good debt, and that’s the kind of debt you should be embracing for a higher credit score and a better life.  

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About the Author

Nicole Spector is a writer, editor, and author based in Los Angeles by way of Brooklyn. Her work has appeared in Vogue, the Atlantic, Vice, and The New Yorker. She's a frequent contributor to NBC News and Publishers Weekly. Her 2013 debut novel, "Fifty Shades of Dorian Gray" received laudatory blurbs from the likes of Fred Armisen and Ken Kalfus, and was published in the US, UK, France, and Russia — though nobody knows whatever happened with the Russian edition! She has an affinity for Twitter.
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