Debt Explained

Seems that some people do not understand Debt the way I do. I found these and had to repost...

What is the Debt Score? Dave Ramsey explains it best with his description of the FICO Score or as he calls it the "I Love Debt Score".
2011 National Debt Explained - Why the US was Downgraded in 2011.

What is the Debt Score? Dave Ramsey explains it best with his description of the FICO Credit Score or as he calls it the "I Love Debt Score". FICO stands for Fair Isaac Company, the company that created and computes this credit score. Although other companies also compute credit scores, FICO is the most trusted, and most used, score.
I am not saying that the Credit Score has no use in this Country but Dave Ramsey's description explains a lot.

Here is a small excerpt from Dave Ramsey's website (click for more info).

The dreaded FICO score.
     It’s that number that’s associated with every credit report. We all know about it—most people have one—but what does the credit score really mean?
     Like it or not, your credit score is not an indicator of winning financially. All it tells you is whether you are good at borrowing money and paying it back. That’s it.
     But let’s take a deeper look. How is your FICO score determined?
- 35% of your score is based on your debt history.
- 30% is based on your debt level.
- 15% is based on the length of time you’ve been in debt.
- 10% is based on new debt.
- 10% is based on type of debt.
It’s the I-Love-Debt Score:
     Your FICO score is an I-love-debt score, isn’t it? Does it factor in your income—or, even better, your debt-to-income ratio? Nope. Does it factor in your savings accounts, net worth—anything other than debt? Absolutely not.
     The only way to have a good credit score is to go into debt, stay in debt, and continually pay your accounts perfectly—without adding too much debt or paying too much off. In other words, stay in debt for as long as you can. How ridiculous is that?
     Now, if you are on Dave’s plan—paying off old debt and not opening any new debt—then you’ll eventually reach the point of being debt-free. At first, you’ll pay off credit cards, car and student loans and things like that. Then, one sweet day, you’ll finally knock off that mortgage.
     After killing all that debt, your credit score will become “indeterminable.” This is great news! By this point in your life, you haven’t taken out a loan in years, you’ve saved a ton of money, and you’re paying cash for everything. So you don’t need a credit score, anyway, since you don’t plan on using credit!

Simply put, the Credit Rating or Score is nothing more than a gauge that ranks how well you can pay your debts. If you have a large Debt and have the assured means to pay the payments, then you are considered a small risk. You will have a higher score or rating. Typically, depending on the method, individuals have a score and an organization has a rating.

2011 National Debt Explained - Author Unknown but this is clear. This rather brilliantly cuts thru all the political doublespeak we get. It puts our national debt into a much better perspective...

Lesson # 1: Why the U.S. was downgraded:
- 2011 National Debt Summary
  - U.S. Tax revenue: $2,170,000,000,000
  - Fed budget: $3,820,000,000,000
  - New debt: $ 1,650,000,000,000
  - National debt: $14,271,000,000,000
  - Recent budget cuts: $ 38,500,000,000
- Let's now remove 8 zeros and pretend it's a household budget:
  - Annual family income: $21,700
  - Money the family spent: $38,200
  - New debt on the credit card: $16,500
  - Outstanding balance on the credit card: $142,710
  - Total budget cuts: $385
- Got It ?????
Lesson # 2: Here's another way to look at the Debt Ceiling:
What if...... You come home from work and find there has been a sewer
backup in your neighborhood....and your home has sewage all the way up to your ceilings. What do you think you should do? ...... Raise the ceilings, or pump out the crap?

Your choice is coming in every election and there are a few every year. Educate yourself and go vote.