How Good Is Good Debt?

If you dream of being debt free, you are not alone.  It is easy to find podcasts, YouTube channels, and blogs providing a steady stream of aspirational content about a lifestyle that does not revolve around money.  The trouble is that it takes a lot of money, a lot of luck, or a considerable amount of each to be debt free.  You may have noticed that debt free lifestyle personalities tend to live in houses they inherited in rural areas.  When you don’t have a mortgage payment or rent due every month, your employment income is plenty to pay the property taxes in a sparsely populated area.  Yes, you and I can buy a board game from the thrift store just as easily as the debt free folks can, but we would never have time to play it because we spend every waking money on work, looking for additional jobs or gigs, and chores.  For most of us, the goal of paying down debt is to enable us to borrow more money to fund a more stable existence.  If your debts are getting bigger each month, though, that is a problem.  For help developing a debt repayment strategy that keeps your long-term goals in mind, contact a Philadelphia debt relief lawyer.

When Does Debt Help Your Credit Score?

Paying down debts is good for your credit score.  Taking on several new debts in rapid succession is bad for your credit score, and so is applying for a loan but getting declined.  This might give you the impression that anything you borrow has a negative effect on your credit score, but that is not always true.  Someone who has never borrowed money has no credit history and therefore no credit score; the only exception is the new programs where landlords, or tenants working through third party apps, report rent payments to the credit reporting bureaus.

One of the factors affecting your credit score is whether you have both kinds of debt, namely one-time debt and revolving debt.  One-time debt is a relationship that ends once the debt is paid off.  For example, once you pay off your car loan, you own the car free and clear, and you and the lender go your separate ways.  Revolving debt is a credit card, your line of credit; you can borrow any amount up to the credit limit, and your installment payments can be anywhere from the monthly minimum payment to the entire balance.  If you pay your balance down to zero, you are free to start borrowing again.

Less Is More With Debt, Even the Good Kind

One revolving loan and one one-and-done debt is all you need to get the maximum score on “diversity of debt” on your credit report.  Two credit cards are not better than one.  You can improve your credit score more quickly by putting more money toward paying down your revolving debt.

Contact CONSUMERLAWPA.com  About Taming Your Debt

A Philadelphia consumer law attorney can help you take charge of your debt, even if becoming debt free is a distant goal.  Contact CONSUMERLAWPA.com to set up a free, confidential consultation.

Source:

finance.yahoo.com/news/6-most-harmful-myths-debt-224650218.html