Debt Isn't Always a Four-Letter Word

Times are tough, but don't blindly follow the "debt is bad" mantra.

People who haven't worried about debt in years past are now finding it isn't all that fun to carry it when the economy turns sour and housing prices drop. That said, not all debt is bad. As with most issues relating to personal finances, learning to avoid the extremes and figure out the best way to make debt work to your advantage should be a primary goal.

Here are six examples of how debt can be good for you:

Debt builds wealth. If you have a great idea for a company but you don't have the money to start the business, you will either have to save it or borrow it. If the business becomes profitable, it often makes sense to borrow money to get started rather than wait for years to save it. If you have developed a quality business plan that realistically shows you can succeed, one of the best ways to make that happen is to get a loan.

Debt helps your credit score. It's one of those ironic aspects of finances: To get a good credit score, you have to first take on some debt, or else be viewed as a poor credit risk. This is one of the reasons you really do need a credit card (as long as you use it responsibly). A higher credit score sometimes translates into lower interest rates.

Debt makes buying a house possible. For most people, saving up enough money to buy a house before making the purchase isn't realistic. As housing prices continue to fall, it can be a good time to start looking for a house or investment property. It's important to remember the mortgage crisis wasn't caused because people borrowed money to purchase houses, but that they borrowed more money than they could afford to pay back when the loans reset.