Our society has been spoon fed the myth that the FICO score is king. We work, we pay bills on time, we are slave to the almighty credit score. Every time we turn around, someone wants to sell us credit or help us improve our scores. We are told from a very early age that we must establish credit by opening credit cards and using them repeatedly. We are led to believe that debt is a tool to help us build wealth. But it is all a myth. We don’t NEED credit scores. In fact, by trying to obtain a good credit rating, we are setting ourselves up for failure, or at the very least, for a lifetime of debt.
College students are inundated with credit offers to “help” them get started in the “real world”. They are given limits that far exceed what they are even able to pay while going to school full time. Many of them do not even have jobs with which to earn the money to repay their creditors! Add to this student loans, and most young adults start off in the real world with a stack of bills that they struggle to pay with their entry level jobs. In fact, a large number of people that file for bankruptcy each year are college students. But this fact doesn’t stop these credit mongers for chasing their prey or feeding lies to these impressionable young people.
Most people would agree that we don’t NEED credit cards. Sure, they are nice to have, but we could get by paying for the smaller things with cash. But what about a car? Everyone needs credit to get a car loan, right? The fact is, we as Americans are obsessed with our cars. Where else in the world will you find a couple on the verge of financial ruin, struggling to pay their bills, with two new cars sitting in their driveway? I say save up the cash! Buy a car outright-it will save you thousands in interest over the years and you will not be saddled with the monthly payments. There really are some nice, inexpensive used cars out there and if you have no other payments, it really won’t take that long to save up enough for a used car. And here’s the good news: you aren’t married to your car! It is not a lifetime purchase! Most vehicles reach a certain point where their depreciation virtually stops, or at least slows down to a snail’s pace. If you buy a cheap used car and continue to save money, chances are you can sell it six months to a year later and get about what you paid for it. Add that to your savings and get a nicer car without ever owing the bank a dime!
On to the next myth, the biggest one of all: the home mortgage. We have been raised to believe that we will never be able to own a home without a good credit score. While the truth is, you can buy a home with no credit at all. Welcome to the world of manual underwriting. This is the way that our grandparents bought their homes, in a world before we went into debt to buy every little thing our hearts desire. There are still many banks and credit unions that do manual underwriting. This is a little more work for the bank, because it is much easier to just look at a score and say “yes” or “no”, but it still can be easily done. First they will look at your employment history, to see how long you have been at your job. Two years or more is a big plus. Then they will check with your landlord to see if you have been paying rent on time, or even early. They will also check with your utilities companies to make sure your bills are current and are paid on time. The final things they will check are your bank account balance and history and how much of a downpayment you have. The larger the downpayment the better, because this means less risk for them to loan you the money, but it is also helpful to save a nice sized savings account that you can fall back on if you are faced with a crisis. Once they determine these things you are on your way to owning a home!
It may take some will and determination to be different than the average Joe. But imagine the possibilities that would open up to you if you had no payments. Imagine what you could do with your income if you got to keep it. Don’t fall for the creditors’ myths. They are trying to take your money!