Good Debt And Bad Debt-2

What’s worse than the mounting consumer debt is the loss of
opportunity when bad debt prohibits us from acquiring credit for
investments—good debt.

Good debt is debt that produces a financial benefit—it’s an investment.
It’s debt that is used to purchase assets, specifically those assets that
put money into your pocket every month. Debt used to acquire a rental
property, piece of equipment or a business is good debt especially when
the income from that asset covers the expenses of the debt every month.
With good debt, the investment pays for itself over time.

A catchy phrase I’ve heard a number of times to describe the difference
between good debt and bad debt is:
Good debt feeds you while bad debt bleeds you.

Leverage is when you use some of the equity in your assets, or the
assets of other people, to buy more assets. The power of leverage is the
greatest tool of wealth building. And without good credit, leverage is
unobtainable.

For investors and business owners, leverage is the tool that expands
your purchasing power and accelerates your success. Credit, leverage,
other people’s money (OPM)—call it what you will, but if you have a
history of misused credit, or have never established any credit, then
this important tool is not available for your use.

Let’s go back even further to discover the meaning of credit. The word
"creditor" is derived from the Latin word "credere," which means to put
faith or trust in.

Historically, the credit decision by a lender was based entirely on trust.
Banking was done on a handshake by a local lender based upon the
borrower’s reputation in the community. A lender trusted that a borrower will honor the debt, and pay it back in accordance with their
prior agreement. In essence, a creditor was someone who was willing to
place his/her faith in you. It is the trust in your ablity to borrow
money and pay it back over time, with interest.

With our economy becoming more global every day, someone’s personal
relationships and reputation in the community now plays a minor role
in the typical credit decision. An agreement between two individuals,
concluded by the traditional shaking of hands, is a rare relic. Although
credit in today's world is still based on trust, now the trust factor is
determined far less by relationships and far more by a system of scores
and formulas.

When you apply for credit, you usually grant permission for the
prospective lender to review your personal credit history as compiled
from a credit bureau. For most borrowers, credit decisions are largely
based on this impersonalized score and a sterile set of financials.

Not so for the wealthy. The wealthy in society are still able to borrow
money far in excess of what they own and earn. Unlike the majority of
borrowers, the wealthy still bank on relationships and a handshake,
allowing them the opportunity to create more and more wealth.

The lenders to the wealthy know credit is much more than a score and
a balance sheet. They view credit in a way that is far different from the
typical social folklore on what makes good credit. Some of the credit
myths that the wealthy and their lenders know are false:

• Credit is bad.
• If something is done to my credit fraudulently, it’s easy to repair.
• If I get a raise, I’ll have a better credit score.
• This loan will go through no problem because of the value of the collateral.
• Getting out of debt is the best way to financial freedom.
• A good credit score means I have good credit.
• Closing accounts will increase my credit score.
• Paying my credit cards in full every month is the best way to improve my credit.
• I have all the credit I need.
• Getting a copy of my credit report will hurt my score.
• Shopping for a large ticket item will hurt my credit score when multiple vendors pull my credit.
• Declaring bankruptcy will damage my credit forever.
• I should have no problem getting credit for my rental property, even though I’m a renter myself.

I will expose and debunk each one of these myths
in the articles that follow, and teach you to
think of credit in the same way that the
wealthiest people do.

By reading this blog, you have made a
commitment to improving your credit. The good news is, you are 24 hours away from better credit, 90 days away from
more credit, and as little as two years away from the kind of credit
profile that can make you a credit millionaire.

Yes, you can be a millionaire by focusing on your credit. This blog will
tell you the secrets the wealthy use to become wealthier, and provide
you with proven strategies for repairing, increasing and polishing your
overall credit profile.

Keep in mind that your credit can be improved—whether it’s new, poor
or excellent.
If you have bad credit, your credit problems are surmountable—no
matter how bad your past indiscretions or misfortunes. The only way
to repair damaged credit is to continue moving in this positive
direction. Take baby steps.

If you have no credit, we will walk together through the process to build
it. It may take some time to build really great credit, but in as little as
90 days you can have a positive credit profile. If you already have good
credit, it can get better! Presentation is often the primary reason that a loan gets accepted or approved. In this blog you’ll learn how to present
your credit profile in a way that lenders can’t resist.

The only way to get millionaire credit is through the proper application
of credit building strategies over time. And the only way to be a credit
millionaire is to use good credit to purchase assets.
Next time i'll discuss starting your journey to a good credit.