The objective of this paper is to help explain one aspect of the changing capital structure of U.S. production agriculture – the increase in the number of debt free farms. It is considered that the farm operator’s decision to borrow outside funds as a “two-step” process. Credit decisions are inherently joint decisions between the lender and the borrowers. Our findings suggest that nonfinancial factors, such as operator age, region, risk aversion, and financial factors such as debt service ability and the cost of capital play significant roles in distinguishing borrowers from non-borrowers. Future research will consider other potentially key explanatory variables and explore alternative econometric methods of modeling farm household credit use.