I was watching Dr. Phil yesterday afternoon, when he interviewed a young couple. They had become engaged, but the young lady hadn’t yet told her mother. But that’s not what jumped out at me.
During the course of the conversation with Dr. Phil, it came out that one of the young lady’s concerns about her fiance was that he didn’t have a credit card to establish credit.
While I agree that having a credit card can help establish credit, too often that’s the end of the advice. As a young person, I was told that I needed a credit card to establish credit. But the advice right behind that statement needs to be “Pay off your credit card in full every month, and don’t go into debt.” Unfortunately that bit of advice isn’t often talked about.
What Dr. Phil thankfully pointed out was that although the young man didn’t have any credit, he also didn’t have any debt. The young woman? Oh, she had plenty of credit….and $10,000 worth of credit card debt to go along with it.
Personally, I’d rather be in the young man’s position.
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Woo! I totally agree- I’d much rather be in his position!
Me too!
I could relate to this post as my son , who is freshman in college just got his first credit card, at our insistence, to build his credit rating. We have taught him that he should never charge whatever he cannot pay for when the statement comes in at the end of the month. To help keep him on track I have taught him to do what his father and I have been doing for years. He keeps all receipts of his charges in an envelope and keeps a running tally of his charges on the outside of the envelope. This way he always knows exactly what his bill will be each month. I am happy to say that he has been using this system for 4 months now and agrees that it only takes him a minute or so at a time to do it.
another way to build credit is to take out a loan on your own savings through a bank, then you just have to pay yourself back over time.
I am against credit. I only had a car loan before I got married, but my husband had a few cards, lots of cc debt and then I started using them. We’re still paying on that mess. We’ve been married over 6 years. We are down to our last two credit cards, and those will hopefully be paid off by summer next year (10).
Once we’re done with them, we’re closing the accounts. When we’re ready to buy a different house, we’ll go to our local credit union/bank and get a manually, personally underwritten loan, instead of them just looking at our great FICO score.
We listen to Dave Ramsey, and are trying to follow his plan, although there are still lots of kinks along the way, due to our idiocy, not the plan ;) http://www.daveramsey.com
I’m a fan of Dave Ramsey’s, too, and we don’t use credit cards either. I can see that they’re useful, if used correctly, but so many people don’t do that.
“You need a credit card to establish credit” is the battle cry of Visa and MC and of the many PF bloggers who make money promoting credit cards. Not true.
Lynnae,
Well said. IF you use a credit card, always pay it off every month. I am curious about what ways one can establish credit without owning a credit card. It seems that tabatha’s idea is a good one. Are there other ways?
I don’t know. We stopped using credit cards after our credit was already established, so it was never an issue for us, once we wised up. LOL
I’m going to have to look into that. Sounds like a great post idea!
I hate credit cards!
We bought our first home in Europe in 1996, a 15 year mortgage, we managed to stay away from credit cards.
But in 2005 we, a military family transferred back to the US, bought a house, a fixer-upper, and decided to do the home-improvement on credit cards (hugeeeee mistake!)
In the actual market, the house with all the improvement is worth way less than the price we paid for it, and we owe thousands of dollars in credit cards.
Believe it or not, I am a frugal person, I do not like shopping and I never bought nothing in credit, not even cars. I never had a credit card, and now I am floating on debt, we got carried away by GREED, wanting to roll away a house and make money on it, as everybody was doing. Never again
Thanks God our house in Spain will be paid off next year, and thanks God I attended graduate school in Europe, which was practically free.
I just hope I pay off my credit cards, we are suffering money problems, but I choose to see it as challenge, it will make us stronger.
Credit Cards are EVil, I will never, ever…use one again.
About 10 months ago we took a Dave Ramsey class at our Church and we use a cash envelope system for groceries, eating out and date night money. We take out a set amount every month and when the money is gone it’s gone! We used to over spend quite a bit using a credit card. I am couponing at the grocery store now and saving about $300./month! I decided to start a blog to share with others…..
Just found your site and I love it!!
I got into 40k worth of debt and I am now paying it all off. Credit cards aren’t worth it!!
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