Yes, you really can live modern life without a credit card. While the system is set up to appear as if the only way you can get a hotel room or rent a car is with a credit card, you don’t really have to have one. Both can be done with debit cards too.
You can also build your credit score without credit cards, here’s how.
Pay Utilities On Time
Odds are you have a cellphone, as well as electricity, rent, Internet service and/or a cable bill. While the people behind these services do not usually report positive payment activity to the credit bureaus, if you get behind and they turn your account over to a collection company, you can bet that agency will. While paying on time won’t always have a direct effect on your credit score, missing payments can impact it negatively. Always pay utilities on time.
Take out a Student Loans
While many decry student loans as an undue burden, they can in fact help young people establish credit without taking out a credit card. Pay on time and the world will view you as a responsible adult. This will make it easier to get a car loan, a home loan or a business loan when the time comes.
Get a Secured Credit Card
OK, so technically, this IS a credit card per se; however there’s one very important difference between a secured card and a conventional credit card. Your personal assets back secured credit cards rather than your promise to pay. To obtain a secured card, you’ll make a cash deposit with an issuer to serve as the collateral to back your purchases.
As long as you pay your bill according to the agreement, your deposit remains untouched. If you’re thinking of going this route, look for a card that doesn’t carry an annual fee. Always pay off the balance before the end of each billing cycle so interest doesn’t accrue and make sure the issuer reports your activity to all three major credit bureaus.
Buy A Car
If you have a reasonable down payment, many finance companies will write you a car loan, even if you have no real credit history. They’re willing to do this because the automobile will secure the loan. If you fail to pay, they will repossess the car and report your untoward behavior to the credit agencies. With that said, a car imposes additional expenses, such as insurance, registration, fuel and maintenance. If you’re thinking of getting a car, make sure you can afford to operate it too.
The main thing credit reporting agencies look for is a history of meeting your obligations in a timely manner. Always pay your debts—either on time or before they’re due. And, above all, be careful to avoid biting off more than you can chew.
If you’re reading this because you’re in trouble with credit and you’re trying to figure out how to rebuild your credit score without credit cards, consider negotiating repayment plans with your creditors rather than filing bankruptcy.
There are a number of firms out there specializing in helping people get their finances back on track in this manner. As an example, Freedom Debt Relief can work out deals with your creditors to reduce the amount you owe to make repayment more feasible. While this won’t improve your credit score directly, it can make it easier for you to do so once your settlement is complete.