Good debt versus Bad debt

Good debt versus Bad debt

Ok, I am very confused, when has it become good to be in debt? I must be missing something? Many financial gurus talk about bad debt; Credit Cards, and good debt Mortgage and school loans.

The theory is a mortgage is a good debt because you are borrowing money to purchase an “asset” that in theory will appreciate over time. Same with a school loan you are investing in yourself and in time your value will rise.

But the fact of the matter is there is no such thing as a good debt. I like to call it the necessary debt. Being in debt is not a good idea by definition (the state of owing something (especially money); “he is badly in debt”.

Most people can’t buy homes, cars and fund education with cash on hand. I understand that better than anyone. But simply because we need these things does not mean its good debt. And I would encourage everyone to pay their debts off as fast as possible, good or bad.

Crush your debt and live life debt free!

Money 101 Controlling debt

Controlling your debt.

You can take some very easy steps to start the process of getting your debt under control and improving your credit.

But let’s talk a little about what is good debt and bad debt. In my eyes there really isn’t such thing as good debt. Before you jump out of your seat and scream well a mortgage is a good debt… A mortgage is a necessary debt and the faster you can pay it off the better. Being in debt means you are not able to take that money and invest it in interest creating entities.

So with that lets look at a some bad debt and some necessary debt and some things you should not do.

Bad Debt:
1. Credit Cards. (Most cards have interest rates in the teens!)
2. Auto Loans
3. Personal loans
4. payday loans

Necessary debt:
1. Home loans
2. Borrowing for school

Things not to do:
1. Don’t let your spending get out of hand. Create a budget and live within your means. Hey if your grandparents did it so can you.
2. Don’t just pay the minimum on your cards. It will take you 30 plus years. It’s a credit card and not a mortgage. Go after that debt.
3. Do not go over your limit. You are just giving your Credit Card Company the authority to push your interest rate up. It’s in your terms of use. Which none of us read but really should.

Things to do:
1. Aggressively pay off your credit cards. There are two schools of thought on this one.
a. Pay off the highest interest rate cards fastest regardless of what is owed. Then take that money and apply it to the next highest interest rate card. Continue until you are debt free.

b. Pay off the card with the lowest balance first. Then take that money and apply it to the next biggest card. Continue until you are debt free.

2. Have an emergency fund. Believe me you will need it. It’s Murphy’s law when you can least afford something it will happen. The car dies; the roof is leaking, doctors bills, etc…. Folks it will happen. So be ready. I suggest at least a minimum of $1000 in the bank. Ideally you want six months of pay check in the bank. I know this is unrealistic for most people who are struggling to make just the minimum payment. So start the $1000 fund.

3. If you need help with your debt situation please face the music sooner than later. Your credit Score will thank you. Word of caution, be very wary of all the debt reduction and relief sites and programs out there. There are a lot of snakes in the grass so don’t get bit! I will write another article on what to look for and what to stay far away from.

Citigroup e-savings accounts

As seen on the Yahoo home page:


Citigroup introduces a new product called e-savings accounts. This savings account will give higher than normal interest rates in an effort to attract more customers.

More customers they can then cross sell them on lines of credit and credit cards! Will a 4% interest rate savings account off set the 17% to 30% credit card rates they charge!

No way!!! Be careful of the true intentions of this offer.


The three major credit reporting companies have come up with the “ultimate” new credit worthiness system. The new name of this system is VantageScore.

Hmmm so now that the credit reporting companies now have to give out copies of the old fico reports free isn’t it interesting they have come up with a new product to sell.

Any way you slice it you can be sure this program is not in favor of the consumer.

Google launches finance site

Google launches finance Web site

The Good news is you have more choice to get financial info. Move over Yahoo and MSN Google has launched their own site.

The site is in beta and is in the no frills style Google is known for… You may want to check it out:

2 things you should never do

Paying late:

This is the number one factor in determining your fico score. Also if you pay late you give your Credit Card company the ”right” to raise your rates some time as high as 30% or more. And guess what they will. They are in business to make money and do not care about you or your family.

Going over the limit:
Again just another chance for your Credit Card Company to raise your rates. Simply put just don’t do it.

Simple rules I know but you would be surprised how many of us do break these two rules and as a result we suffer.

Can Yahoo help

So I went to and clicked on the finance link. There was nothing on the page on how to deal with debt. So I clicked on banking and Credit link and still nothing on how to deal with credit card debt.

I then clicked on Credit Cards and finally there was a link on the left side navigation under education: dealing with debt. Ok so now we are getting somewhere. I click on the link and get an error. The page can’t be found…

Hmmm. So Yahoo really wants you to sign up for Credit and loans but they don’t really want you to manage your debt?

Sounds familiar. Please if you are going to use credit be sure to do so carefully. If you need help please check out the many articles and resources in our blog.

Free REO Listings

If you are looking for REO listings I have found a Free source. It’s provided by Countrywide, one of the largest Morgtage lenders in the U.S.A. CountryWide has made their searchable database open to the public. There are hundres of properties so take a look and see if anything is in your area.

Simple Guide to credit counseling

Simple Guide to credit counseling

I am sure you have seen the TV commercials from debt consolidation companies lining up to help you out of your financial situation. But will they really help you or could they do more harm than good? Questions you must ask yourself before you engage them for help.

A simple fact: The debt counseling industry rakes in about $7 billion a year! Wow! This is a huge number. So any company offering to make your debt disappear or help you through the “tough times” has a very large profit motive. So you should do your homework. There are many legitimate debt counseling companies but there are many that are fly by nights trying to cash in on this $7 billion a year industry.

If you can pay all your bills on time and are current on all your bills then don not use credit counseling! This is not the proper debt reduction method for you.

Consider credit counseling if:

• Can’t pay your minimum payments
• Late consistently
• In collections
• Unable to negotiate better terms with your creditors

What to watch for:
• But be careful of high up front fees.
• Missed payments
• If the company makes promises that are too good to be true
The bottom line:
Some lenders will look at enrolling in credit counseling as a negative and will not lend to you. Others will not. So it’s really a personal situation if you want to contact one of these services. If you do, be very careful because there are many sharks in the water and there are some very legitimate companies. Do your homework.

paying bills can hurt your credit

Can paying old debts hurt your credit score? Yes.

First off let me tell you I believe in paying all your debts on time and in full. I believe this for moral and legal reasons, so this post is not away to validate not paying old debts.

So here is the issue. If you have old debts that are delinquent, charge offs, or in collections and pay them off in full this can cause your Credit Score to drop drastically. Why? Because the payment on the old debt will actually update the negative marks on your credit report? It could inspire a new round of collection.

Some people advise you let the statue of limitations run out on your account and hope your score goes up because the account is no longer showing on your report. Others say you should, and have a moral obligation to pay your debts no matter the impact on your credit report. This is a personal issue each person has to make for themselves.