THE RIGHT KIND OF DEBT
- johnathanmcquoid
- Jan 17
- 2 min read
When you apply for a mortgage, lenders aren’t just looking at your income — they’re looking at your history of borrowing and repaying money.
If you were about to loan someone $300,000, you’d want proof that they can handle debt responsibly, right?
Lenders are no different.
The key is not avoiding debt… it’s building the right kind of debt history, in the right way.
Here are the three types of credit that help build a strong profile for mortgage approval 👇
1️⃣ Credit Cards
A credit card is usually the first (and easiest) way to build credit.
Lenders want to see:
✔️ a limit of at least $2,000
✔️ regular usage
✔️ balances paid on time
✔️ low utilization (under 30% of your limit)
Simple habits like putting gas, groceries, or recurring bills on your card — and paying it off monthly — can significantly improve your score over time.
2️⃣ Car Loan
A small auto loan can be a powerful credit-building tool when managed responsibly.
Why lenders like to see this:
✔️ fixed monthly payment
✔️ shows ability to handle larger debt
✔️ builds strong payment history
Just try to keep the loan reasonable — and ideally have it paid off before applying for a mortgage to help reduce your debt-to-income ratio.
3️⃣ Line of Credit (LOC)
A line of credit is the “next step up” from a credit card.
Benefits for building credit:
✔️ higher limit
✔️ lower interest rate
✔️ flexible repayments
✔️ shows responsible management of larger available credit
The key is to avoid maxing it out.
Use small amounts and pay it down consistently — lenders love to see this pattern.
💡 Why this matters
A lender is far more confident approving someone who has:
✔️ a well-managed credit card
✔️ a past or current auto loan with clean payments
✔️ a line of credit in good standing
…than someone with no credit history at all.
In today’s lending environment, a strong credit profile isn’t optional — it’s essential.
💬 Need help building the right credit mix?
If you have questions about which credit accounts to open, how to improve your score, or how debt affects your mortgage approval, message The Frontline Mortgage Group.
We’ll review your current situation and give you a clear plan to get mortgage-ready. 💬