We get a lot of questions, many from very seasoned buyers who have purchased several homes.  If you have a question, please email cconlon@afncorp.com and we may use it in an upcoming article.

This week’s question comes from a client we are assisting in getting a handle on their credit.

Q.  We have lots of credit card debts, why does some debt help and some hurt my ability to buy a larger house?

A.  Not all credit is bad, but some is. According to a recent survey, over 53% of American’s stress over finances.  With an average household consumer debt service of over 26% of gross earnings, that before Uncle Sam, Healthcare and any sort of retirement.  That doesn’t leave much money for good debts.  Consumer debts are basically debts tied to anything that will not be worth more over time, but in fact can and mostly do, depreciate to nothing.  Revolving and/or credit card debt is the Great White Shark of consumer debt, fluctuating with use, variable in interest rate and unpredictable in monthly payment, quickly eating up your credit score and borrowing capacity.

Use this TEST, If the debt increases your net worth, then it is a good debt!  If it is simply a debt you are taking on to pay for something that does not increase in value and you are using the credit to defer paying because you cannot pay in cash, then it is a bad debt.  Sorry, but yes that includes cars and as a car guy it pains me, but remember, it eventually depreciates to zero.

Good Debt.  The only truly good debt is a mortgage, we don’t always see the 10-15% gains we have recently seen, but conservatively we see a 3-5 % increase in home prices annually.  The asset goes up, as the loan goes down.

Every situation is different, Call or email Chris or Bob if you would like a personalized tips and tricks to improve your score with little effort.

Chris Conlon cconlon@afncorp.com 704-609-5017

Bob Parm bparm@afncorp.com 704-778-2603