I want to preface what I’m about to say by saying that I haven’t changed my position on anything. Sometimes when you talk to a lot of other people about a topic, you realize that you may have been overlooking some things.
The truth is, people can get by without credit. The other truth is, not having credit will make certain other areas of your life more a pain.
I’m in the position where I have no use for an inflated credit score. I’ve had a cell phone for over a decade. I have almost 10 years of paying utilities, rent & mortgage, and all manner of bills early. I refuse to finance cars or take out other kinds of loans. I have money to pay for emergencies. Even if I get another mortgage at this point, the difference in interest rate between what I could get with an 800 and a 700 doesn’t matter to me. I’m not going to invest the difference. I would just spend it on crap. The first rule of philosophy is “know thyself.” And I know myself well.
Without established credit, one of the things you’re going to run into a lot is paying deposits. Of course, when you pay a deposit, you get it back after a year, or in the case of renting, you get it back when you move out. Just about every place you rent is going to make you pay a deposit regardless of your credit or rental history. It’s policy – in case you wreck the place. I had credit when I graduated from college, so paying a deposit at my apartment is my only experience with paying deposits. I didn’t have a new cell service deposit or utility deposits. I have no idea how expensive paying deposits everywhere can be.
It’s true that debt is for broke people. I was super broke. I used debt. And it also keeps broke people broke until they use force to break the cycle. But one of the reasons debt products are so attractive is because having a credit card (and paying on time) for less than one year, gets you out of thousands of dollars of deposits. Yes, you get them back, but you’re out of that money for a year or more. A lot of people would freak the hell out at the thought of being out of a $1000 for a year, even if they do have money in the bank.
So, from the position I am now, it probably is easy for me to say that credit cards and building credit are unnecessary. I certain don’t need them, and they certainly haven’t enhanced my life. I’ve been horribly irresponsible with money. Credit cards to people like me are vehicles to wrecking-your-life town. And plenty of other people have wrecked their lives with other debt products (and they are PRODUCTS, not TOOLS). Some of them didn’t even own a credit card. They wrecked their finances with things like car payments and payday loans.
So, yeah. I have no use for a credit score. I have nothing new to set up that would even put me in the position of having to pay a deposit. Even my insurance rate can’t get too high, and if it does, plenty of other companies would absolutely love to have me because I’ll never call them, I pay in full, and I carry a pretty high deductible, so I can’t even bother them unless a steamroller rolls over my car anyway.
This said, I can see that having credit does make starting out in adulthood easier. Fear of this transition into adulthood is the reason I cared about my credit in the first place.
You can crunch the math, of course, and say that caring about your credit will save you tens of thousands of dollars over the course of your life because you’ll save an extra half of percent in interest when it comes time to get a mortgage, if you ever get one, and not everyone does. And part of what your mortgage rate is going to be depends on the market anyway. They’re low now, but they’ve been literally 7x higher than this in the past.
In the whole scope of our lives, trying to save every penny we can, everywhere we can, it isn’t worth our time. We’re not here, living life, to save as much money as we can. We’re here to live the fullest purpose of our lives that we can. My purpose in life isn’t to pinch every dollar that I can.
Some people care about squeezing pennies. I’m just not that person. I don’t care about money. I only don’t want to be stressed about it so I can focus on the things I do care about. Things like writing. It’s extremely hard to be creative when I’m worried about how I’m going to pay all of my bills.
Banks are not stupid. They know most people they give a credit card to are going to carry a balance. It’s a business, and they’re in the business of selling products that they can make money on. This isn’t a horrible, evil thing. It’s a fact. It’s my job as a savvy consumer to see through flashy advertising.
If someone wants an 800 credit score, because that will make them feel good about themselves, it’s totally their life. I wasn’t happy with my 760. It made me sick because even then I understood what it had cost me.
I personally don’t think there is anything wrong with the principal of having credit – which is why I hope the industry finds a way to score utility bills and cell phone plan payments, so people don’t have to take on debt or risk it in the name of building their credit. Because I see how, in theory, it is helpful to banks and property owners. And like I said, it makes life a little easier, and who doesn’t want an easier life, no matter how spoiled they are, and most people are quite spoiled in the whole scheme of things.
The problem is that people get in trouble with debt products because they’re too easy to mishandle by design. The problem is that math nerds and finance nerds throw math at us as the reason why we should care. “It’s costing you more money over the course of your life,” they scream. But who gives a crap? Life isn’t a math problem. There are too many variables. Not to mention, when people are on their death beds, they don’t ever say, “I wish I saved every single cent I could.” Hell, no. They say, “I wish I spent more time with my family.” “I wish I followed my dreams.” “I wish I hadn’t worked so much.”
Go ask a dying person what their regrets are.
From my perspective and experience, credit makes certain parts of your life less of a hassle. You save the most amount of money by staying out of debt anyway, not getting the best interest rates you can. It may not be worth risking debt to build credit. I don’t think it was worth it. Looking back, if I had money for all of those deposits, I would have just paid them. Because also looking back, I can see how much less stress (and money) I would have had if I had been more responsible with money.
After all, the real problem with the credit system is that it’s set up in favor or the banks, not the consumer. And the real problem this country has with debt is that we don’t educate people about it, and we don’t encourage enough people to think for themselves.