After you have achieved a credit score of over 700 you will be in a position to take bigger advantages when it comes to purchasing. You should now start qualifying for 0% interest, "same as cash" offers, and other money saving offers. This is the best situation to be in. It is an easy way to make, save, and get more for your dollars while enjoying justified purchases. Let's discuss why.    

     Again there are other counselors that will tell you if you are going to make a purchase you should be buying slightly used with cash. 1) Because in most cases the consumer related purchase you are about to make will most likely depreciate in value the moment it is delivered to you and 2) you don't want to tempt fate (non payment) by playing with credit again.

     I don't argue with their theories, however, it boils down to three things for me. 1) Is this purchase justified and have I set aside the appropriate amount of cash to purchase it? 2) Am I truly in a financial position to buy the item I want? 3) Have you met other deciding criteria?

     Here are two ways of looking at the same situation - a non repairable refrigerator. Should I buy a "less than new" $500.00 refrigerator from the scratch and dent store with cash or should I buy a $1,200.00 brand new one with the bells and whistles we would like to have, that the department store is offering with free financing?

     Is the purchase of a refrigerator justified? Yes. The old refrigerator is officially dead. We need a refrigerator for our food. Am I truly in a position to buy the more expensive refrigerator? Yes. I have $1,2000.00 available in cash for this purchase and have met other deciding criteria. Those criteria are: I have contributed to my retirement savings as planned. I have no other consumer debt to pay down. I can recoup some of the depreciation value through the interest I will earn on the cash we set aside for this financed purchase until the due date on the loan. The purchase will add value to our quality of life (this particular model uses less energy than the less expensive model).

     I like to use furniture as an example since I worked in the retail furniture industry. These retailers often make the sale because of the credit they are able to extend to customers for this larger purchase. Often times they offer 12 or more months "same as cash". You do not have to make any payments for 12 or more months. At the end of the loan term you owe the principal amount immediately. Here is how to use the offer in this particular example to your benefit.

     You make the furniture purchase with the credit offer extended to you. You don't have to put any money down today. However, based on the yearly projection part of your budget you should have the cash set aside for this major purchase. So during the time you are enjoying your justified furniture purchase the $2,500.00 you spent on furniture is sitting in a 12 month certificate of deposit at your bank gaining interest. Prior to the due date on your furniture loan you cash the certificate of deposit, notate the interest earned for your tax statement, use the interest to pay other debt or make other planned purchases, and then pay off the furniture loan. You've gained interest and boosted your credit rating with another paid off loan.

(It may not be as impactful but you could also put 12 monthly deposits of about $210.00 into a savings account for a year until it is time to pay for the furniture loan. I am not as big of a fan of this option but if you are positive your income is reliable and it works in your budget it is a second option)