How you repay debt determines your credit rating, so knowing about the types of debt is important.
Installment loans are for big-ticket items such as cars or homes. Installment loans are paid in monthly fixed amounts and are normally secured (i.e. backed by something of value, such as a car). Payments should be manageable in your budget. Make payments on time as this will help improve your credit rating.
Credit cards and department store cards are revolving credit lines. Credit cards are heavily marketed and the terms often look better than they really are: Proceed with caution! Credit cards have a monthly payment that varies based upon total amount owed. Poor handling of credit cards can quickly hurt your credit rating.
Student loans are unsecured installment loans. Explore all your financial aid options, focusing first on scholarships and grants that don’t have to be repaid. Borrow only the amount you need to get through college. You will be happy to have a lower student loan payment when you begin your career and want to buy a home and a car. Be realistic about what your salary will be after graduation and estimate the amount of debt you can afford. Ideally, student loan payments should be 10 percent or less of your net monthly income. Total debt, including your mortgage payment, should not exceed 36 percent of your gross income.