There is a big myth out in the money world – you must have a credit file and the only way to get it is to go into debt. Both are simply not true.
You can exist with a zero credit score just fine. However, if you want to get a mortgage, it can be a little more tedious than if you have a credit score. But it is possible and as a matter of fact, many millionaires have a zero credit score simply because they do not ever borrow money. If you never borrow a dime, your score will be zero. If you have borrowed in the past, it will take many years to get down to a zero credit score, but it can be done.
Most debt free people however have a high credit score. How do they obtain this without going into debt? It is simple – you get a credit card that you use for something like a utility, cell phone or any recurring monthly payment and then you pay if off every month. This will give you a great credit score because your credit utilization will be low (and it will be zero if you pay before the statement date) and you will pay everything in full every month.
Having a credit file of some kind does make life easier and less expensive. Insurance companies, utility companies and even some employers are using credit reports to determine your rates, to see if a deposit is necessary and even to see if they should hire you. I highly recommend a credit report, but you don’t have to go into debt to obtain it.
Credit cards were designed to be a form of payment – just like a check, cash or now, a debit card. However, over the years, we have let that get out of hand and we use them to get what we want now instead of waiting until we have the money.
So as you can see, you can build a credit score without going into one dollar of debt. If you are already there, it is not too late. If you already have debt, the best thing you can do for your score is to pay it off and never use cards again (at least until you can use them as a form of payment). If you are new to the money thing and don’t have any credit yet, don’t hop on that hamster wheel. Simply get a small card, use it once a month and pay it off immediately. Voila – credit with no debt!