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Don’t waste your energy on credit, you never need it and I’ve got the proof:

Posted on : 08-08-2009 | By : The Wife | In : Uncategorized

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I love love love Trent at the Simple Dollar.  He has written for a while and has excellent advice, gives wonderful access to financial related resources and well, he’s just an all around great guy (have never met him, haven’t ever even spoken with him, just my personal opinion based upon reading his blog for a couple of years now).

He recently wrote a post that I want to highlight here and “counter” so to speak :).  I’m now of the belief that credit is absolutely unnecessary and the benefits of not having credit far outway the miniscule benefits of having credit.  In fact, the benefits of having credit are more often than not, myths!!

Trent contends that there “are a lot of upsides to healthy use of credit” and they are:

  1. helps your insurance rates
  2. helps you with employment options
  3. offers great buyer protections
  4. helps you with renting

Trent summarizes that it “pays to have a strong positive credit rating”.

Let’s look at this in perspective.  First and foremost, all too often we are comparing a good credit rating with a bad credit rating.  Most people see our credit ratings as one or the other.  In fact, there is another option and that is no or a minimal credit rating.  If you do not use credit, you have no credit rating.  Do you realize that someone with no credit history is often treated like someone with a good credit history?  Especially when they can provide references?

Let’s look at each item in order:

  1. helps your insurance rates: there are company options out there that do not consider credit rating in their pricing factors, barring that, most companies consider bad credit to receive the lowest ratings, therefore the highest rates and premium credit to receive the highest ratings, therefore the lowest rates.  An individual with no credit history generally falls somewhere in the middle.   The price difference?  Literally minimal.  In fact, the price difference is a fraction of the cost that having credit financially costs you, in interest rates (yes, I’m including mortgage interest rates), in annual fees, in costs of time to manage it and take care of the payments, etc.
  2. helps you with employment options: yet again, another one that is often brought up and all to often used as an excuse to “have credit”.  Let’s look at this one in reality – what % of jobs demand that an individual actually have a high vs. a non-existant credit rating?  Minimal.  In fact, even with that minimal %, the likelihood of the issue actually being a determinant of the amount of DEBT the individual has – relating to the possibility of them accepting bribes, becoming financially corrupt, etc. as opposed to them having zero debt and zero reason to be a security risk… yeah, that’s what I thought.  Being out of debt is a good thing and shows strong moral character.
  3. offers great buyer protections: let’s see… so do debit cards!  Debit cards offer the same buyer protections as credit cards, especially when using them with a signature vs. a pin.
  4. helps you with renting: actually, no it doesn’t.  What helps you with renting is a good rental history and no bad credit on your report.  Renting does not require “use of credit”, it only requires no bad credit.  I have first hand experience with this: my sister owns a large property management company and hubby and I have rented homes in 5 different states and 8 different cities.

Let’s look at all of this in reality – most of us have a credit history.  For those that do not yet, DON’T DAMAGE it.  Just stay away from credit and live within your means.  For those of us that already have a credit history, getting out of debt and getting rid of the credit cards, auto loans and mortgage loans will have an excellent effect on our credit.  You won’t be opening more lines of credit and you’ll be paying off debt.  Once things are paid off, the history stays sometimes indefinitely.

So there you have it – credit is NOT required, period.  When you keep your credit report clean, you are good to go.  Keep it clean, even non-existent, don’t live beyond your means and you’ll have full power and control over your money, without being a slave to debt.

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Copyright 2009, Freedom and Happiness

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