You’ve heard the phrase “Bad Credit, No Credit, No Problem!” countless times, haven’t you? But I bet you never thought I’d agree that it is a true statement, did you? If you have bad credit or no credit, it really is no problem because you don’t need credit to survive. Your FICO Score does not define you. You are worth more than the money you can borrow. Don’t let your existence be like the schoolboy who passes FICO (his beloved sweetheart) a note to ask if she likes him. We aren’t in elementary school anymore. As Americans, we have been fed the lie that our self-worth is based on what we do for a living and how much stuff we can accumulate. Today I’m going to give a sermon encourage you as to why this is simply untrue. I wrote a post about this a while back, but I think there is much more to the discussion.
I want us to dig deeper into why it is or is not important to have good credit (or any credit at all). Beyond having the easy ability to borrow money (which I believe is a bad thing), there are only a few of potentially viable reasons for worrying with your credit score:
- Employers sometimes run credit checks before hiring.
- Potential Landlords sometimes run credit checks before renting out property.
- Insurance companies will sometimes use your credit score as a measure of your risk.
Let’s look at each of those:
Do you want to work for a company that uses your FICO score to determine whether or not you’ll be a good employee? Me neither. If the company really uses this measure as a major determining factor in your hire, you should be looking elsewhere.
It is true that some landlords are lazy enough to only pull a credit score to see if you have good credit. But why is that going to determine if you’re a good lessee? If a landlord actually pulls a report and looks to see if you have a lot of bad debts on there, that is an obvious red flag. Otherwise, who cares about the score? Wouldn’t a better measure be to look at your history of paying rent at previous places or to look at your work record or other items? Get a letter from your previous landlord or your employer. There are always ways around this without going into debt just to have a three-digit number that determines you’re worthy to live somewhere. (Related Article: what is Credit Sesame?)
Your insurance company is all about minimizing risk. As a company, they have to calculate whether or not you’re a risk to them and then price insurance to you accordingly. Some companies use your FICO score to help in that calculation. How this is used is a bit of a mystery, but even if it cost me a few extra bucks a month in insurance, I’d much rather pay that than keep up with minimum payments on debt (which would cost a heck of a lot more in interest!).
Have I convinced you yet? If you can even get a mortgage without having ever before borrowed money (trust me, you can – it’s referred to as nontraditional credit – Fannie Mae, FHA and VA do it all the time), what good reason is there for “building your credit?” I challenge you with this – a FICO score is not a measure of how wealthy you are. It is a measure of how willing you are to take on debt and stay in debt for long periods of time. We don’t live that way around here and I won’t teach you to do it either. In my counseling sessions, I always bring a pair of scissors. There is no reason to be in bondage to a piece of plastic or the monthly statements it brings. There is no reason to be victim to bad circumstances that you could have easily avoided.
Since I’ve been pretty direct (okay, BLUNT) in today’s post, I encourage your comments, whether you agree or disagree. But before you make any response, please picture yourself as the parent of an 18-year-old who just got their first credit card offer in the mail. He asks you what you think about it. What do you do? It is your shining moment to alter the course of your family tree, but it is up to you.