Trade in Bad Debt for Good Debt Annette Bui| Updated May 2, 2020 | Mortgage Programs 101 Understanding the key difference between good debt and bad debt makes a significant difference on qualifying for a home loan. For credit reporting agencies, “revolving debt – better known as credit card debt – is the 'bad' debt that weighs down your credit score. The higher your credit card debt, the lower your credit scores will be" (Cox 2017). Even without the cash reserves to downsize or eliminate credit card debts, you still have the option boost your credit rating. The smart way to do so is by converting credit card balances to what is considered the “good” debt – installment debt – that is considered by the credit-scoring world to be less risky and thus more beneficial to your credit scores” (Cox 2017). What is a credit score? Credit score falls anywhere from "300 – 850, better is higher. It's a measure of how likely you are to default (fail to pay) on a lo
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