Build Credit Without Credit: Your Top 3 Questions Answered
How to establish your credibility in a credit-based world
Some people seem to believe that the credit score is almost as important as oxygen and water. Most of that stems from the fact that we’ve been beaten over the head with the importance of the credit score since we first learned the difference between a $10 bill and a $5 bill.
But it’s simply not true. Can you really live without a credit score? Absolutely—and it’s actually easier than you’d think. It just takes some foresight, planning and maybe a little patience.
The credit score myth is tangled up in almost every part of our financial lives, but there are a few areas that seem to come up over and over again. So, here are the top three questions we get about how to live without a credit score:
How do I rent an apartment?
Most apartments will work with you if you can provide first and last month’s rent, as well as a security deposit. Ask them up front about their process and what type of information they’ll need. If they want a credit score and you don’t have one, simply tell them that you’ve never gone into debt and you use cash. Get a rental history referral from your previous landlord. If it’s your first time renting, you might have to look around for a little bit. But you’ll be able to find someone to work with you.
How do I take out a mortgage?
If you don’t have a credit score, you should focus on one thing—making sure you have a large down payment. If you’ve never gone into debt, that shouldn’t be too difficult, right? Without a credit score, the down payment, as well as your job and how long you’ve been employed in that line of work, are big factors.
You’ll also want an outstanding history of rental and utility payments. Look for a mortgage company that uses a process called manual underwriting, sometimes called “non-traditional credit” or “no credit score” lending. And whatever you do, don’t buy a house until you’re ready. That means you’re out of debt, you have a 3–6-month emergency fund, and you have a good down payment. Of course, you could always just pay cash for a house!
What if an employer wants to see my credit score during the interview process?
This is a growing trend, but it mainly affects people in the financial industry—banks, mortgage brokers, investment companies and so on. Again, the key here is to learn their process up front and explain why you don’t have a credit score if they ask you about it.
Remember, these answers only apply if you have no credit score. If you have a bad credit score, that’s a different situation entirely.
For renting, offer to put an extra month down if you are getting resistance from the property manager because of a bad score. For a mortgage, be patient, rent for a while, and save up even more to put into a down payment.
Our culture will tell you otherwise, but it is possible to live without a credit score. Sure, sometimes it might be annoying because of the way so many people have become addicted to the credit score. But seriously, it will never be as annoying as having a huge pile of debt!
Tired of putting up with FICO? Have you considered how different your life story could be without it? Check out these stories from people like you who are changing their lives by making the decision to live without debt!
How are you proving your financial credibility without utilizing debt? Tell us your experiences with the situations mentioned above.