Not all debt is bad. Sometimes, people take out a loan (go into debt) in order to reach an important goal , such as getting a college education or buying a home.
A "good" debt, or loan, will help you get something that will be valuable for a long time (like a college degree or a house).
A "bad" debt, or loan, will help you get something that won't be valuable for very long (like buying pizza with a credit card or borrowing money to buy clothes you don't really need).
Which of the following might be a "good" debt?
1. A. Loan to pay for college tuition; B. Loan to buy concert tickets
2. A. Loan to buy a prom dress; B. Loan to buy a used car to get to work
3. A. Loan to pay for AP books and exams in high school; B. Loan to go out to dinner with your friends
Answers: 1.A, 2.B, and 3.A
No one wants to be in debt, but try not to be too afraid of debt if it's for something important for your future like a college education. Also, if you have a debt and pay it as promised, you will develop a good credit history. Good credit can help you later when you need to take out a loan to buy a car or house.
Here are other ways to develop good credit:
