4 Things About Debt You’re Confused About but Too Embarrassed to Ask

This article is in partnership with Credello. You can probably get through your life pretending to understand everything about debt—fake it till you make it, right? But much like high-heeled Crocs, that’s not really necessary. Get answers to all your questions about debt that you’re too embarrassed to ask your financial advisor boyfriend about because…

Michelle Schroeder-Gardner

Last Updated: November 27, 2021

Disclosure: This post may contain affiliate links, meaning if you decide to make a purchase via my links, I may earn a commission at no additional cost to you. See my disclosure for more info.

This article is in partnership with Credello.

You can probably get through your life pretending to understand everything about debt—fake it till you make it, right? But much like high-heeled Crocs, that’s not really necessary.

Get answers to all your questions about debt that you’re too embarrassed to ask your financial advisor boyfriend about because what if he breaks up with you because he thinks you’re an idiot and you’re going to die alone? Don’t overthink it.

There’s “good debt” and “bad debt”?

Think of “good debt” as Glinda the Good Witch and “bad debt” as the Wicked Witch of the East. Sure, they’re both debt (or witches), but good debt helps you learn, grow, and get out of Oz—and bad debt, well, that’s more on par with getting crushed by a house.

Good debt is considered money you owe that can eventually help you increase your income and/or build your wealth in the future. Student loans are a prime example, but mortgage and business loans also fall under the good debt umbrella.

Meanwhile, bad debt is money you owe on credit cards or other debt that generally doesn’t help to improve your financial situation. Of course, carrying each type of debt isn’t necessarily inherently good or bad—it really depends how you put each to use.

If you’re overwhelmed with either type of debt, a debt consolidation loan can help ease some of the burden, and Credello can help you find the best offering for you.

What is a debt consolidation loan?

A debt consolidation loan is a financial strategy that helps you combine several higher-interest debts into one more manageable payment, presumably with a lower interest rate.

Why would I take on another loan to pay off existing loans?

Depending on your long-term financial goals, a debt consolidation loan can potentially help you lower your monthly payment if you struggle to come up with the minimum every month or help you save money on interest in the long run. So, while you’re technically taking on additional debt, a debt consolidation loan can almost act as a cheat code to beat the big boss faster while losing fewer lives.

Credello’s debt consolidation calculator can help you determine if consolidating your debt is a good fit based on your potential savings and interest rate.

Will a debt consolidation loan help me become debt-free faster?

A debt consolidation loan can help you become debt-free faster if that’s your goal, but in this case your monthly payment likely will increase. So, if you’re already struggling to make the minimum monthly payment, this might not be the best option for you.

Will I save money with a debt consolidation loan?

You can save money by taking out a debt consolidation loan, assuming that’s what you’re trying to achieve. If you want to pay less every month, it will likely take longer to pay off your debt, and you’ll probably pay more in interest over time. If you want to save on interest over the course of your loan, your monthly payment likely will increase, even if you qualify for a lower APR.

How do interest rates work, and what the heck is an APR?

Interest rates come into play both with debt repayment and savings accounts. With savings accounts, your interest rate is represented as APY, or annual percentage yield. The national average APY on savings accounts is 0.04%, according to the FDIC. In other words, it’s next to nothing.

When it comes to debt, though, interest rates generally are represented as APR, or annual percentage rate. This is the amount of interest you get charged when you don’t repay your last statement balance in full. If you pay off your balance in full and on time every month, you won’t have to pay interest.

Your creditworthiness can affect the rate you qualify for on loans and credit cards. Typically, the better your credit score, the lower your APR. When you have a variable APR, like with a credit card, you can negotiate with your creditor for a lower rate if you’re not happy with the one you have.

What’s a credit score?

You know this is a number that exists, sure, but maybe you don’t know what yours is or the different types of credit scores there are.

FICO Score and VantageScore are the two main scores that lenders use to determine your creditworthiness. Both use ranges of 300-850, with the higher end being excellent or exceptional, and the lower end being poor. Basically, if you have a credit score above 800, that’s worth bragging about on Hinge—especially if that’s your most attractive feature.

If you’re not sure where to find your credit score, check with your credit card issuers. Many issuers now offer access to your credit score for free.

Your credit score is determined by the three major credit bureaus—Equifax, Experian, and TransUnion—based on certain factors.

FICO Score factors

Your FICO Score is made up of five factors, with certain factors weighing more heavily than others.

  • Payment history (35%): paying your bills on time is the most important factor in determining your credit score, so don’t miss those due dates.
  • Amounts owed (30%): also known as credit utilization ratio, which is your account balance compared with your credit limit. Experts recommend that you keep this below 30%, but the lower, the better.
  • Length of credit history (15%): having a longer history with credit proves to lenders that you know how to handle debt.
  • Credit mix (10%): maintaining a variety of credit—like credit cards, auto loans, student loans, mortgages, etc.—can also show you’re responsible.
  • New credit (10%): opening multiple accounts at once can set off alarm bells for lenders, so be mindful not to apply for several loans or credit cards in a short window

VantageScore factors

The latest VantageScore model (4.0) uses similar factors to FICO, but broken down slightly differently.

  • Total credit usage, balance, and available credit: Extremely influential
  • Credit mix and experience: Highly influential
  • Payment history: Moderately influential
  • Age of credit history: Less influential
  • New accounts: Less influential

Do I really need a budget?

Do you really need that second bottle of wine? Do you really need mozzarella sticks before dinner? I mean, no, but need is subjective.

You’re not going to die without a budget—it’s not water or the next season of Curb Your Enthusiasm—but having one probably will offer you more comfort, especially if you overspend and can’t seem to get yourself out of a debt cycle.

According to a 2019 Debt.com poll of 1,000 Americans, about 2/3 of respondents had a budget, but only 1/3 actually maintained said budget. And in true American fashion, respondents thought everyone else was the problem: 1/4 of respondents said everyone should budget, whether or not they do.

Different budgeting methods work best for different people. The 50/30/20 rule is a commonly used method that suggests you allocate 50% of your income for needs, 30% for wants, and 20% for repaying debt and/or saving. There are several tools, like Mint, that can help you create and stick to your budget because having a budget is useless if you don’t abide by it.

Still have debt questions?

This isn’t the end-all, be-all of embarrassing debt questions: There are countless questions around debt that you may be hesitant to ask. Sometimes external help can be complex and burdensome. Plus, there’s just an overwhelming number of financial resources out there, making it harder to find the best fit for you. And ultimately, that can make it more difficult to become debt-free.

That’s where Credello comes in. Credello provides personalized guidance that helps to simplify debt decisions, holding your hand throughout the process to get you and Toto safely back to Kansas.


  • FDIC
  • Debt.com

Author bio: Casey Musarra is a personal finance writer with over a decade of writing experience and a credit score hovering near 800. She has written several hundred articles on topics ranging from taxes to debt-free living. Previous bylines include newsday.com and philly.com.

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Having debt can subliminally motivate a person who’s striving for excellence to value the struggle of overcoming debt, and inspire them to shift focus into a new mindset of using debt to wipe it out, and use it as a vehicle to start a side hustle and achieve future status of “side hustle millionaire.”

  2. Lauren Conklin

    Hi Michelle! I love the way you break down all of the overwhelming factors and vocabulary. But I feel like having a budget is definitely a NEED! (I also find nachos a need so maybe my priorities are out of whack lol). Household budgets are crucial to regaining control of finances. Especially for married couples who may be on different pages without even knowing it! When my husband and I update our family budget it actually relieves my stress. It also strengthens our relationship- despite the occasional squabbles over my expensive nachos habit!