To Owe or Not to Owe – Which is the Best Way to Go?

Some feel your credit score defines you. Others say, even if it negatively impacts your score, it is better to live debt free. Where do you weigh in?

Personally, I’d love to have a tip top score and no debt, but according to some financially savvy sources, far wiser than myself, the two do not go hand in hand. I recently read a Reader’s Digest article, by Holly Johnson from THESIMPLEDOLLAR.COM. She told of how she and her husband had recently paid off a loan and the negative impact it had on both of their individual credit scores. They decided they prefer the debt free lifestyle over obsessing about their scores.

Others may be more concerned with their score and keeping it as high as possible. This may mean carrying debt but handling the amount and the payments in a super responsible manner. How do you do that?

I hate having to think about and pay bills. I get busy and forgetful, so how do I manage my payments and keep a good score? My answer is auto-pay! The more automation the better. My direct deposit is split into three accounts. One account receives a healthy slice of my paycheck each week; my mortgage, property taxes and insurance all get taken out of that account each month. No worries about forgetting, incurring penalties or negative marks on my credit report. When I had an auto loan it was set up on auto-pay too. The rest of my pay goes into what I consider to be my everyday use account. Other auto-payments come from that account, such as my cell phone, power and other utilities. I even have one of my two credit cards set to auto-pay in full each month. On the other, I carry a small balance, but always pay on time. With Bill-Pay, available through our Credit Union, you can easily manage and set up auto-pay for your regular payments.

So, like most of us, I do not live a debt free life. I do, however, make a habit of using my credit responsibly. Though many of us may dream of having no bills, for most it is not practical or perhaps not possible.

What are your thoughts? Which do you feel is better, to be debt free or manage debt responsibly?