Re: Credit and Credit Scores: A short lesson
The correct ratio of debt to assets is very, very healthy. If you manage your debt correctly, you can afford things you never would be able to if you had to pay full price up front (obviously).
A great example is home equity loans or lines of credit. If you are 10-15 years into a 30yr mortgage on your house at x% interest rate, and you apply for a home equity loan equal to the remaining amount of money on your mortgage at a lower interest rate, you then pay off the mortgage with the loan and continue paying the loan at the lower interest rate.
BTW, the CD example was completely last-resort and something for people who have absolutely ZERO credit set up. Most people can't use credit cards responsibly; hence the CD option.
As a closing thought for right now, remember, rich people think of their home as an ASSET. Poor people think of it as a liability.
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