Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts

The Difference Between Good Debt and Bad Debt

Debt - most of us can’t stand it. When we think about how much we owe on our homes, cars, student loans, credit cards, etc., it can be overwhelming. Have you ever wished that you could just win the lottery so that you could pay off your debt? Just a high enough jackpot to pay off your bills to live debt free would be great, right? 

Well, don’t wish away all of your debt. In the eyes of lenders, there is such a thing as “good” debt and bad debt and it’s helpful to know the difference.

Lenders may be more favorable with certain debts. Having debt on something that could increase in value over time and may contribute to your overall financial health could be considered “good” debt. 

Here are two examples of “good” debt:

• Home purchase – Homes usually appreciate in value, so your mortgage loan may be considered an investment. 
• Student loans – This debt may be considered “good” because it’s usually used towards education – which in turn could help you earn money over a lifetime.

So what is a bad debt? Disposable finances or money spent on things you don’t necessarily need can be considered bad debt.

Below are two examples of bad debt:

• Going out – It’s easy to look past these “small” expenses, but they can easily build up. Shopping sprees, going out to dinner and movies can be considered bad debt. 
• Vacations – That trip to the Bahamas you were planning on going to later this year before you paid off your other bills could be another example.

There’s a fine line between “good” and bad debt and it can be easy to lose track of your expenses. Consider getting your credit history by regularly reviewing your credit report. This may be helpful when prioritizing your payment plans for the future. 

Good Credit Score in 2013

The New Year is here, and if one of your New Year’s resolutions was to maintain a good credit score in 2013, here are some methods experts recommend to help you keep your resolution:

1.    Make a financial plan, and set a budget.  Your budget should include all daily expenses, and longer term expenses you see popping up during the year.
2.    Check your credit report.  Make sure there are no errors in your existing report.  You want to start the year off with a clean slate, so this should definitely be a priority.  To get the best picture possible of errors in your credit reporting, you need to check your report from all 3 national credit bureaus – Experian, Equifax, and TransUnion.
3.    Use credit cards responsibly.  While opening credit cards and paying them off in a timely manner can do good things for your credit history, using a credit card irresponsibly can do considerable damage.  Make sure your credit card payment strategy is part of your larger financial plan.  Your credit reporting provides a complete history and record of card accounts and credit you may have.
4.    Tackle any debt you already have.  Before digging yourself into an impossibly deep hole, make sure you settle any debt you may have accumulated. 

This year should be all about starting new and fresh. Start the New Year off by following these best practice guidelines, and your credit may be in better shape than before!  PrivacyGuard can also help you stick to your resolution.  With PrivacyGuard, you can view your credit report and scores, set up credit monitoring alerts, and use the financial calculator suite that can help determine the best ways to pay down certain kinds of debt.  These resources can certainly be helpful to you while working to achieve a good credit score in 2013!

Don’t Go Into Debt This Holiday Season

It’s easy to get caught up in the spirit of the holidays and not realize how much you’re using your credit card.  Going over your credit limit can lower your credit score, which can make for a bad case of the post-holiday blues.  Here are some tips to prevent falling into holiday debt:

  1. Set a Budget.  Allot yourself a certain amount of money geared towards holiday expenses. Don’t let yourself go over that set limit!
  2. Make a List (and check it twice)!  Write down everything your money is going towards this season whether it be gifts, holiday food, or miscellaneous items like decorations. Making a list will help you keep track of what you need, and how much you can spend towards each item.
  3. Cash, not credit.  An easy way to not go over your credit limit is to simply leave your credit card at home.  Use cash at the store, and you won’t be tempted to rack up charges on your card!

Don’t let the holiday season affect your credit score.  Follow these tips to keep your season merry and bright!