Credit is NOT Debt

[Anonymous]

There's a lot of misconception about Credit being Debt and vice verse. I'm creating this post to explain the two, and if anyone else can chime in that would be great. Confusing credit as debt is a flawed way of thinking. One is a good thing, the other is bad. Believing both are bad is well, BAD!

Definition of Credit:

1. confidence in a purchaser's ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.

2. influence or authority resulting from the confidence of others or from one's reputation.

3. commendation or honor given for some action, quality, etc.: Give credit where it is due.


Definition of Debt:

1. Theology. an offense requiring reparation; a sin; a trespass.

2. something that is owed or that one is bound to pay to or perform for another: a debt of $50.

3. a liability or obligation to pay or render something: My debt to her for advice is not to be discharged easily.

So you see they are not the same thing, and they need to be understood as such. There is a real problem when people lump the two together, and especially when Charismatic individuals touting financial improvement plans (i.e. Dave Ramsey) are able to convince millions of people that having anything to do with Credit is bad. Of course, people tend to listen to this advice because it is radical and direct and so anti-establishment.

I wag my finger in the direction of these financial preachers and those that believe they don't need to maintain good credit.

[Anonymous]

What an excellent post rifleman! I loved reading every word of it. Not only is it true, it makes so much sense. Well done! Thank you for the food for thought.

[Anonymous]

Great post! I just read daves book and it opened my eyes on alot of financial stuff, like budgeting and ira's, mutual funds and such. I'm taking alittle of his advice and a little of myfico's so now i'm good to go!

[Anonymous]

FISCAL RESPOMSIBILITY - we expect it from our elected government officals.  Imagine if we held ourselves to the same standard.

Using credit is not the same as accumulating debt.  In fact the wise use of credit will help one accumulate less debt on mortgages and auto loans.

[Anonymous]

Yes. Correct. Thank you for contributing. It is worrisome that people confuse these things. The whole cutting up cards-shunning anything credit-related included.

I think what needs to be cut up are people's misconceptions and bad credit-management skills.

[MidnightVoice]

Nice thread.  I agree totally, and I am with the Scarlet Woman () in preaching fiscal responsibility as the basis of good credit and improving credit scores

[Anonymous]

Although your post is so true, you can not falt them for preaching this and it is a good thing that people listen to what people like David Ramsey have to say they just need to read between the lines and pick and chose what parts to listen to then follow them up with what you just posted and then you can get plenty of help that is needed in running your finace. It has helped me to do that and we have went from high 300's and low 400's to high 500's and mid 600's so far.

Thanks,

Debbie )

[crivas21]

excellent post and thank you.

[Anonymous]

Nice. Yes but keep in mind that many banks see available credit as available debt. It works for and against depending on who and why they are looking at it. If the bank feels you are very responsible the credit helps. If they decide other wise extra credit may hurt chances of increasing credit with that bank.

Message Edited by ilovepizza on 10-16-2007 11:36 AM

[wrw0010]

"FISCAL RESPOMSIBILITY - we expect it from our elected government officals.  Imagine if we held ourselves to the same standard."

I cannot believe that someone used the words “Fiscal Responsibility” in the same sentence as “elected government officials.”

If I used the same fiscal responsibility as government officials, my actions would be as follows:

Want:    A new swing set and playground for the kids in my neighborhood.

Action: Go down to the rich neighborhood and forcibly take 1/3 of everyone’s paycheck.

Want:  Huge yacht.

Action: Too expensive for the paycheck tactic so instead go to garage and print counterfeit money to pay for it with no regard to the inflationary consequences.

Problem: No money in checking account

Action:  Write checks anyway because I’m the only person in the world who doesn’t have to balance my budget.

Message Edited by wrw0010 on 10-16-2007 12:34 PM