use credit, or not use credit? That is the question.
answer really depends on whom you ask. Even the experts
donít always agree.
debt generally has a bad reputation, it can actually be
a very valuable asset, says author and AARP Bulletin
columnist Jane Bryant Quinn, based in New York.
radio talk show host Dave Ramsey will tell you,
"Debt is dumb, and cash is king."
credit cards and going strictly cash might seem like a
great idea, but going without credit for too long will
leave you without a credit score, which destroys any
track record of financial responsibility. That hurts
your chances for insurance, apartment rental or getting
you have no debt at all, you have no credit score,"
Quinn said. "While a low credit score is a strike
against you, if you lack a credit card, your score is
zero, and you essentially do not exist."
a syndicated radio show host based in Nashville, Tenn.,
who prides himself on avoiding all debt and having a
zero credit score, said thereís a difference between
having an indeterminable credit score and a low credit
score. In Pittsburgh, "The Dave Ramsey Show"
airs from 8 p.m. to 11 p.m. on WPGB 104.7.
means youíve had no interaction with debt or that youíve
been debt-free for so long they donít have enough data
on your interaction with debt to give you a score,"
he said. "Since you have no debt, you probably have
it comes to mortgages, Ramsey said there are still
lenders who will provide manual underwriting services,
which do not rely as heavily on credit scores for loan
approval. Going this route might be a little more
difficult, but itís far from impossible, he said. The
same is true for renting an apartment.
key is to have lots of documentation," he said.
"Show verification of your income for the (past) 12
to 24 months and a steady payment history of at least
four regular monthly expenses. These include things like
past rent, utility bills, cable bills and insurance
itís common these days for insurance companies to use
credit scores in setting premiums, there are still those
who donít and are willing to insure those who fall off
the FICO radar."
Sweet, vice president for public education at credit
rating company Experian in Costa Mesa, Calif., said
consumers will not have a credit score unless they have
a credit report, which serves as a credit reference. A
score is simply a reflection of whatís in the credit
just as important to have a credit reference as it is to
have academic credentials, job or work references and
character references," Sweet said. "People who
donít have credit references and canít be scored donít
have access to traditional financial services and have
to use payday loans, title loans and must pay a deposit
when applying for utilities and have difficulty getting
a cellphone. People who have established credit take for
granted all the services we receive and donít realize
how many are blocked from access to those
who has no debt and does not use any type of credit
could become "unscorable" as soon as six
months after closing credit accounts or lenders stop
reporting an inactive account to credit bureaus under
the FICO credit scoring system, Sweet said, adding that
people still have a credit score while paying off any
3.8 percent of the 220 million consumers on file in the
credit reporting data base are unscorable, Sweet said,
which means they applied for or established credit at
some point and then fell off the credit scoring radar
said there is a difference between using credit and
carrying debt. She recommends consumers carry one or two
credit cards, use them two or three times a month for
everyday items and pay them off at the end of the month.
you get to the wonderful place where you are out of
debt, use only one or two cards and pay them off
monthly," Quinn said.
are only a couple of instances where Sweet says someone
should avoid credit cards altogether.
youíre one of those people who absolutely canít
resist the temptation to overspend, youíre better off
not having credit cards, even if it means having a
difficult time buying a house or car," she said.
other instance is if you are wealthy enough and are
absolutely sure you wonít need credit services and can
pay cash for everything, but otherwise, itís always
smart to have a credit card as an emergency