Is it possible to survive without credit? Is living without credit beneficial, or will it make life hard?
Maybe you’ve filed for bankruptcy or completed a debt consolidation program and you’re not sure about jumping back into the world of credit. For whatever reason, if you’re hesitant to get another credit card or take out a loan, here are 5 benefits to living without credit.
- You won’t get into debt again
Unless you take out a loan from a friend or family member, you can rest assured that you’ll never pay interest or get behind on credit card bills ever again.
Never getting into debt again sounds like a sweet deal. However, make sure your decision is based on sound reasoning and not just fearful avoidance. After going through a bankruptcy or a big struggle to pay off your debts, it’s easy to shrink back from the credit system out of fear.
Consider finding the middle ground where you don’t take out unnecessary loans or spend money excessively. Set limits for your purchases and never buy anything you can’t pay off within a reasonable amount of time.
If you need to use a credit card for normal purchases, get a prepaid card with a Visa or Mastercard logo. There are several types of prepaid cards to choose from, including free prepaid debit cards, reloadable prepaid cards (with no fees), and unlimited prepaid debit cards.
- You won’t buy anything you can’t afford or don’t need
Not being able to finance big purchases can make life hard. However, few big purchases are actually necessary. When you can’t pull out a credit card, you’ll be less likely to buy unnecessary or unreasonably expensive items.
- You’ll simplify your life
When you don’t rely on credit for everyday expenses, your life will become simple and easy to manage. For instance, you’ll have fewer bills to pay and you won’t need to add credit card expenses into your monthly budget.
Without credit card bills and loans, you’ll never experience the stress that comes from having to decide which bills to pay now or put off until next month.
Also, the more you buy, the more maintenance and upkeep is required. If you buy a second car you’ll double your car expenses. If you buy a larger house you’ll spend more on a maid service or more time cleaning it yourself. If you buy expensive electronic gadgets you’ll spend more time playing and less time with your family.
- You’ll learn to get creative
Perhaps the biggest drawback of not participating in the credit system is not meeting the criteria to rent a house or apartment. Finding a place to live without credit will train you to get creative and hone your persuasive skills.
Chances are, you’ll need a minimum credit score of 600 to rent a house listed by a real estate agent. This tends to be a standard requirement set by real estate firms to protect the homeowners they represent.
Why does credit matter? Nerdwallet explains that landlords are looking for things like evictions, repossessions, charge offs, and current accounts in good standing. They’re not especially concerned with account histories. In addition to income, landlords want to know how prospective tenants handle their financial obligations.
As long as you don’t have bad credit and meet income requirements, most real estate agents will discuss your circumstances with the homeowner. However, if another renter pops up with the right credit score, homeowners will likely choose them to play it safe.
If you’ve been out of the credit game for a while and don’t have a credit score anymore, you’ll need to get creative to find a place to live. You might be able to get a co-signer, and with enough on-time payments, the landlord might agree to remove the co-signer from your lease.
For optimal results, look for private listings made by property owners rather than real estate agents or property management companies. There are landlords willing to rent to people who don’t have credit as long as they can provide several years of tax returns and references.
- You’ll have more money to invest
When you’re not living on credit, you’ll spend less money on physical goods. The money you save can easily be tucked into an investment like an IRA or CD.
A debt-free life is worth the sacrifice
If you’re afraid of getting into debt again, try living without credit for a while. You’d be surprised how easy it is once you start living within your means.