Is all debt bad?

[Jesuslovesu]

A credit card is needed to rent a car, a hotel, etc. It is good to pay it off every month. If you don't have the money to pay for something, the credit card can be tempting and get you into trouble. The longer it takes to pay it off, the more you pay in interest to the bank.

[Zeroloki]

Keep at least a basic credit card and use it for fuel or minor things. I consolidated everything and had no loans or credit for fifteen years. No credit or loans hurt me in the long run re- establishing a credit score again even with banking institutions.

[Jcaryl]

My wife and I both have the same remarks on our credit records. We both have union construction jobs making very good money. 5 years ago we went through a difficult time which incurred a lot of medical bills a few of which went to collections. We paid them off together, at the same time and applied for a credit card. She was accepted for $3700 in credit limit between two cards. I was declined. Since then I was able to get a credit card for $300 but have been declined for anything else. My credit score remains at 580 and hers is over 700. What gives? Is there something on my report that i can't see? Our money is in a joint account and we're share all bills. Our dti is 24% and we have 2 months worth of bills in savings. I am at a loss of what to do.

[alntoy2]

See my responses in Brackets []
My wife and I both have the same remarks [no two credit remarks are the same] on our credit records. We both have union construction jobs making very good money [amount you make is irrelevant]. 5 years ago we went through a difficult time [sorry for your troubles] which incurred a lot of medical bills a few of which went to collections [collection paid or not is just an indicator that you can not meet your obligations]. We paid them off together, at the same time and applied for a credit card. She was accepted for $3700 in credit limit between two cards. I was declined[see, told you, if you had the exact same remarks you would have had the exact same response]. Since then I was able to get a credit card for $300 but have been declined for anything else [stop applying]. My credit score remains at 580 and hers is over 700[from this point forward I ask that you forget about scores, yet focus on Content of the credit file. Lenders don't lend based on score, they lend based on what's in the report] What gives [content of report is what gives]? Is there something on my report that i can't see [go to Experian.com and sign up for free account. You can see score and content and score factors, YES ITS TOTALLY FREE!]? Our money is in a joint account and we're share all bills. Our dti is 24% [[good, get it down further] and we have 2 months worth of bills in savings. I am at a loss of what to do [good credit is a game of patience and restraint. Keep account utilization below 29%. Well, that # works for me. Your multiple inquries show you are high risk for non-payment. I've learned that you have to demonstrate responsibility with what you have ($300 limit) before you will be trusted with more (higher limit). Good luck.

[Jcaryl]

Thank you for your reply. Let me assure you that my wife and i have been together 12yrs and have all joint accounts with the exception of the recent credit cards simply because I was rejected. We have printed all three reports and viewed them side by side. Unless there are things which creditors can see and I cannot, our bureaus are the same. Since her acceptance for credit her score has jumped 149 points and mine has remained a dismal 580. The only thing I can guess is it might have something to with my son who has my name. But again, there is nothing that shows on my report. I am considering getting a lawyer to try and help me with this depressing situation. If that doesnt help then i guess i will throw in the towel and be happy using cash only like i have for the past 25 years. Buying a house is not worth the stress of these past 2yrs. And if cc companies think Im going to pay 100/yr to have a plastic card in my wallet that i dont need they are dumber than they must think I am.

[loupokami]

Debt is definitely not bad... if it's managed correctly. That 3 digit number of yours that creditors, insurance, utilities, landlords and employers look at? That's basically a number that determines how good you are at being in debt and how well you manage your money or how responsibly or irresponsibly you spend. Debt isn't just good for you, it's necessary in today's world. 

But debt is only good when you can promptly pay it back, otherwise the debt is only good for the creditor who makes bank off of the high interest you pay on it over long periods of time. 

[Moneymasternow]

So true this happened to great uncle. He never had any debt or credit cards. We could not add his name to phone bill. He had no credit file.

[Financial Guru]

Credit cards are the best thing you can have IF you are responsible and strategize.  My FICO score is 839 so I believe I am able to offer this advice as it has worked extremely well for me.

1.  Only apply for cards that have no annual fee.  You really only need a couple of credit cards.  Do NOT use a debit card for anything except getting cash from an ATM (and only use your bank's ATM's so you will never be charged a fee).

2.  While low interest rate is great, if using them strategically, the interest rate will not matter as you will never carry a balance.

3.  The main thing you want to do is get a card(s) with the best cash back benefits.

4.  Pay all bills possible using your credit card.  Cell phone, vehicle/home insurance, internet, cable, utilities...everything.  Typically you cannot pay your mortgage with a credit card. 

5.  Use your credit card for all transactions you make; restaurants, gas, entertainment, groceries, you name it.  The year end summary is also a great way to see where you spent your money during the year.

6.  I tend to make payments on my credit card(s) every couple of days.  I only charge items I can turn around and pay off that same day.  With that said, it is important to also have some sort of balance at the end of the billing cycle.  However you would pay that balance as soon as your statement is posted/received.  The reason for this is that your credit report needs to show you actually utilize your credit card(s) and the only way this will happen is by having a balance at the end of each statement cycle. 

7.  Now here is the best part!  Every transaction you make with your credit card will earn you cash back.  The cash back benefits vary from card to card, so do your research to find the best one for you.  I personally use my cash back benefits to pay for Christmas.  I let the amounts accumulate throughout the year, and come Christmas time, I typically have around $600 or more that I can use.  

MY Recommended Credit Cards:  If you are someone that uses Amazon a lot, then the Chase Amazon card is excellent!!  You get 5% cash back on all Amazon purchases (this adds up fast at Christmas time), and you get 2% for gas station (includes gas and inside purchases), drugstore and restaurant purchases and then 1% on everything else.  Of course this card also offers no annual fee.

Chase also offers a no annual fee Freedom Unlimited card that provides 1.5% cash back on all purchases.  So I will use this card for everything except Amazon, gas station, drug stores and restaurants.

The above cards are the ones that work best for me, but if you travel a lot for example, you may want to use a card that offers miles.  Again, do your research and find the best options for your situation.  Just make sure there is never an annual fee and you never carry a balance beyond a day or two of your monthly statement being posted.

If you currently have high credit card debt (I did 20 years ago), then you MUST get those paid off and QUICK.  Consider a personal loan to pay them off which will typically be much less interest, OR see about balance transfer offers from credit cards that often give provide  0% interest for some set period of time.  In order to pay off high credit card debt, the key is discipline.  Only make purchases for things you need, and delay your wants for awhile until you get your debt eliminated.  Credit card interest is the worst as it is typically extremely high.  This makes it difficult to pay them off, especially if you only tend to make "minimum payment" amounts each month.  Doing this only leads to a vicious cycle that gets you nowhere close to paying them off.  If you do nothing else, make as large as possible payments on highest interest cards, and then less so on your lowest interest card(s) until you get them paid off.

Being free of credit card debt is the most liberating feeling!!  It's a huge burden off your shoulders.  You can then begin making your cards WORK FOR YOU by never carrying balances and raking in the dough from the cash back offers.

I also have opinions on savings accounts (never put the bulk of your savings at brick and mortar banks such as Chase, Wells Fargo etc.

But I think I have made this plenty long as it is, so I will stop now.  If I'm asked, I can elaborate on this in the future.

"You can't get out of debt while keeping the same lifestyle that got you there" - Dave Ramsey

[MRJordan]

Short answer is yes. Long answer is yes but debt is hard to avoid in todays world. 

Today everyone, including your bankers, grocery store, car salesmen and even TurboTax is trying to sell you debt because they make a killing off of it. Think about how many offers for loans, credit cards and other forms of debt people try to sell you on a daily basis. 

Credit cards, car loans and personal loans are terrible, just don't do it. Most of America is broke because of this kind of debt. These are all for things that depreciate in value sometimes as soon as you get it (like a car). Not only are you paying extra for it, it loses value over the term of the loan so you will never gain anything except a bill every month.

The "good" debt is debt for an item that appreciates in value. This is debt like mortgages, business loans, etc. Any sort of investment can be considered good and is sometimes unavoidable. Don't fall for credit card rewards because you don't make any good money off it and if you miss a single payment you aren't making any money off that. 

Read financial adviser books. A good one is Dave Ramsey. He is radically anti-debt but he even concedes that not everyone can pay cash for a house or business venture (although this is the goal and if you save and invest right it is possible).

The best debt is no debt. If you want to raise your credit score use the auto-pay trick (put a monthly bill on a credit card and pay it off automatically every month). This will raise your score because it will keep a credit card open for a long time and show good money management. Don't buy into getting more cards you don't need or rewards. 

[Trebor12081968]

Kinda..... But bad credit is somewhat better than no credit at all! Be wise

[Teamster282]

What is YNAB

[Incredabro]

No as long as you keep up your payments. live within your means. Start off with a small credit card about $250 and pay it in full every month. You will slowly see your credit rise.

[Incredabro]

Yes this is true

[Robert-Cohen]

I am sorry, people that are in charge that can change rules arbitrarily are scum. Additionally, the rules are not published but are reported to be an algorithm that's proprietary. I don't see anything fair yet

[Keith]

Nothing is good or bad, it depends on how it is used. I’ll use a car for an example. If you buy a car and you have to pay gas, maintenance, insurance, repairs, plus it’s depreciating in value as years and miles go up then that is a bad debt. However if you take that same car and get a low monthly car payment, low insurance, and great gas mileage then you can turn that car into an Uber that pays all the above costs and pays you then that is a good debt. I’m not an advertiser for Uber. I actually don’t do Uber because for my particular vehicle, the increased depreciation, maintenance, and gas mileage, I would actually lose money. My point, though, is debt that is a liability (pulls money out of your pocket) is bad debt regardless of whether or not it’s benefiting or harming your score & debt that is an asset (puts money into your pocket) is a good debt. Money always comes from someone and goes to someone so try to put yourself in a position where other people not only pay your debt, they pay extra and you have increased income. Even a lemonade stand has to pay for the powder, the pitcher, the cups (and technically the water) before the salesperson who is usually 5 years old actually starts seeing a profit. When you buy lemonade It’s a liability because you pay someone else. The person selling it is using an asset because they are receiving the money. School debt is bad debt because there is no guarantee you will ever be payed enough to pay off the debt plus extra to make it worth it. If you want to go to school join the military. Then school is free and the degree is an asset, not a liability.