Guest post by Rod Griffin
Take a moment to consider how ubiquitous credit and credit reports are in your daily life, even for things that don’t involve debt. For example, cellular telephone companies typically review your credit report when you apply for service, utility companies and apartment complexes do the same before activating an account or approving a lease, and a credit card is often required to reserve a rental car or hotel room.
Without credit or a credit report, you may be required to pay a deposit or security fees, have a hold placed on your checking account to obtain services and could even have difficulty qualifying for rent or getting a job.
A better approach is to opt out of debt, not credit. You can have one without the other.
Start by paying off any existing debts. You might choose to close some of your accounts, but don’t close all of them. You only need one or two credit accounts to have a strong credit report. Make a small purchase from time to time and pay the charge in full to demonstrate the account is active and that you make good credit decisions.
You still must do all of the things you would do if you were living a cash-only lifestyle: budget carefully, don’t spend more than you earn and pay yourself first by setting aside savings regularly.
But, by opting out of debt, not credit, you will keep your credit report, which is an important and powerful financial tool.
Rod Griffin is Director of Public Education for Experian. He is responsible for Experian’s national consumer education program and supports the company’s community involvement and corporate responsibility efforts. He supports various national consumer education initiatives including the LifeSmarts Consumer Knowledge Competition, for which he serves on the Corporate Advisory Board, and the Jumpstart Coalition for Financial Literacy. In addition, he produces a variety of consumer education materials and for more than a decade has written Ask Experian, an online consumer credit advice column. Rod holds a B.S. in journalism from the University of Kansas, has a Fair Credit Reporting Act certification from the Consumer Data Industry Association and is a Center for Financial Certifications Certified Financial Counselor.