Debunking the Myth that Debt is Bad

Many people avoid applying for credit with the mistaken belief that credit is bad for you.

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Many people avoid applying for credit with the mistaken belief that credit is bad for you. Many believe that having credit means being “in debt” and that’s bad because once you are “in debt”, you are on an inevitable, downward debt spiral that’s all but impossible to escape. This myth has been around for many years, all the way back to when people hid their cash under their mattress and those who could proudly declare that they had never had a day’s debt in their entire lives were admired for their carefulness.


“Save for what you want and then pay cash. Don’t get into debt. It’s a slippery slope to trouble,” many have been quoted saying. But in 2017, how many of us can afford to pay cash for a home, a car, tertiary education or even furniture? Credit – or debt - is essential. Indeed, avoiding debt at any cost may be bad, particularly if it means depleting savings you might have wisely put aside for emergencies.


The challenge therefore is not to avoid debt (or credit), but to manage the credit you have wisely. There are many false assumptions about what constitutes good credit health.
Many consumers believe that because they had never had a judgment against them, they are financially healthy. They are incorrect. They think they are in pretty good financial shape because they seldom skip a payment on their store cards. They also think it’s perfectly acceptable to do so provided they make it up the following month. They’re incorrect.
Consumers also often juggle their debts. They’ll pay their car instalment on time and ensure they pay the absolute minimum on their credit card – but in order to do so, they don’t pay the full instalment on their mortgage bond. Doing any of this could be an indication of poor credit health.


Why is good credit health important? It is important because poor credit health can affect your chances of getting additional credit. If you want to buy a home, purchase a car, open a store account, take out a new cell phone contract, even stand security on your child’s student loan... in fact, almost anything at all that you are unable to obtain with cash, credit providers may review your credit report to see just how well you have been managing your credit.


One of the first steps on the path to good credit health is to review your credit report and note the areas in which you are excelling; and identify areas that need work. For those areas that need work, make a plan or goal and set a date for yourself to achieve it.  Lastly, ensure you pay your bills on time and in full every month. You can get started today by obtaining a copy of your credit report.

What are the next steps?
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