Rebekah
How does not having a #credit score effect one's significant #financial #decisions in life?
I've recently been viewing seminars by #Dave #Ramsey. He spoke of being #debt free and that having a #credit card is not necessary for #life. However, I know that some transactions request a credit score. Also, when shopping online or #traveling abroad I've always thought it was safer to have a credit card in case I'm #compromised so that I'm not losing my real money. However, being debt free is ideal and perhaps these #life events can still be accomplished #successfully without a credit score. I'd like to know what that potentially looks like.
4 answers
Brent D. Griffin, CPA
Brent D.’s Answer
Rebekah
I disagree with Kim. I do not claim to be a financial advisor however a credit score is not the be all and end all.
-I see nothing wrong with saving up cash to buy a car you can afford.
-If a potential employer evaluates you only on a non existent credit score only, then maybe they are not the right company to work for.
-Debit cards are just as good as credit cards when making online purchases.
-And when it comes time to buy a home, you can consider a mortgage company which manually underwrites the loan. Or, you can even save up the cash and buy a small starter home.
Bottom line - You can survive and thrive without a credit score!
Brent
Brian Downey
Brian’s Answer
Having no credit score can cause you to lose out on opportunities as an employer who pulls your credit or a lender has no profile to judge you on. They can decline you for no credit file. It is important to start out in life with a credit card and pay it on time. Do not use it too much as it can hurt you if your maxing out your credit cards as its a sign of trouble that you have problems paying your bills. Next maybe get an apartment that you can afford and make timely payments. Once you establish a good credit score you will give yourself a better chance in life of landing a job you want and or getting lower interest rates and saving money. Good luck!
Anwar Chohaan
Anwar’s Answer
It is certainly true that you can survive and live without credit cards. However, you have to look at both the convenience and risk associated with Credit and Debit cards.
A credit card allows you to get credit or a loan every time you use it up to usually a credit limit (determined by issuers based on your ability and history of paying back the loan). If you can track your purchased (such as using software like Quicken or QuickBooks) and pay off the balances each month, it is a good way to make purchases both online and at physical merchant locations.
Debit cards are linked to your personal checking and savings accounts and every time you use the card, that amount is taken out right away from your personal account.
If your credit or debit card is compromised (many ways that can happen), you can cancel the credit cards without any liability for fraudulent use and the Issuer will provide a replacement card.
If on the other hand your Debit card is compromised, the fraudulent use can result in your personal checking and savings accounts to be depleted. In that case, the banks will fund your accounts after they are sure of the fraud but in the meantime, you do not have access to your money and if you wrote checks, they will bounce or any recurring payments (bill pay) will not be made. You may end up with a lot of fees for such events and a big headache.
Best option in my opinion is to look at your risks and balance it against convenience. I personally will never recommend using Debit cards in online transactions unless I am very sure of the security of that transaction.
Good luck and it is wonderful that you are looking at your financial well-being.
Regards,
Anwar
Kim Igleheart
Kim’s Answer
Rebekah,
Congrats on starting out so young trying to make sense of finances!I cannot tell you how to live without a credit score.
A credit score is useful for obtaining loans. Sadly, some employers also look at it. You will have a credit score. If you don't borrow any money or apply for any credit cards, your credit score will be very low. That will make it more difficult for you to be able to get loans at a good interest rate.
I am not a financial advisor. I'm just one who has lived a few years. With the internet, it almost requires a credit card to do on-line shopping. I like having a credit card, as it pays me for using it. But yes, you can also get cash back on debit cards.
There is a big difference between the advice of "not having a credit card" and, "not carrying a balance on a credit card." If you are very disciplined, you can use a credit card for convenience, and pay it off, in full, every month. Then, you pay no interest! I have not paid interest in over 7 years. However, I am established. It is extremely difficult when you are young to not spend beyond your means.
My opinion, if you intend to buy a house, or car, you will need a good credit score. You don't want to have to ask someone to co-sign for you, and you don't want a high interest rate. This means, yes, you need a good credit score. Take out a small loan, such as for a piece of furniture, and pay it back over time. Get gas or retail credit cards. Pay them back. Do not ever be late. In fact, you can set up automatic payments from your checking account, to make sure you are never late!