A peculiar article was recently published by Smart Money suggesting that living completely debt free is a bad thing. That your credit score can actually be worsened by having no debt! The powers that be are trying to make us believe that debt is actually good for us!
Apparently individuals are starting out in life with piles of debt to work off. This includes the common student and credit card debt. The rate of debt growth is escalating. So the financial institutions lending us the money are doing a great job getting people hooked on credit. A statistic was issued by the Fed: Since 1995 no mortgage consumer debt has increased 112 percent to nearly $2.4 trillion, according to the Federal Reserve.
Most professionals agree that consumer credit is a bad thing. What was troublesome about the article was the idea that living debt free is somehow becoming square.
A story was told about a person who decided to buck the trend by trying to live free of any credit. He was doing a good job until he needed to apply for a loan. He apparently had no credit history, thus he was not given any credit. My question is what is so bad about that? If we can’t get a loan, and need to pay cash, then we’re going the right direction. He had indicated that “he doesn’t want to find his options limited.â€?  Wow!
The article states:
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“In an economy humming along in part because of consumers’ happy embracement of debt, those who are debt-free can find themselves viewed more as pariahs, rather than role models. Most lenders consider a consumer with no credit history only slightly less risky than one with bad credit, says Craig Watts, a spokesman for Fair Isaac, the company that creates the almighty FICO score.
“Consumers have proven time and again to be creatures of habit,” he explains. “Without some kind of track record, the consumer is a cipher.” “
Is this interesting? People who actually commit to live debt free are ciphers? That is a pathetic statement. Notice where the quote came from; Fair Isaac, who is with out a doubt lobbying along with the big banks wanting us to borrow more and more!
Look, I have no problem with taking out debt to improve your credit score, as long as it’s invested in something that will go up in value over time, and someone else besides me and my income are paying for the debt service.
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