As a reaction to the Great Recession, it makes sense that people may be weary and scared of credit.
In the aftermath, there were write-downs, credit limit decreases, bankruptcies, debt consolidation negotiations, and other associated actions that affected a number of consumers. Again, if one were to be more cautious and reevaluate their credit exposure, this would make sense. However, getting rid of all credit is not a sound financial strategy for most people and choosing to avoid credit altogether is even more so for the young and middle aged.
If you are thinking about not having credit at all or opting out of credit, there are some important considerations to mentally digest. First, there is employment. Many businesses check credit to determine if an individual is responsible or a financial risk to the organization. Having no credit may be a blemish that a great interview may not be able to overcome. Worse, you may not even get a call. If you have aspirations of public service, the absence of credit score could hamper your ability to obtain a security clearance.
Outside of employment in the consumer sector, if you happen to own a car you purchased without a loan, inherited or received as a gift, you still will need car insurance. When attempting to get a quote, insurance companies may check credit to determine if the motorist is a responsible individual or if they are a risk for poor decision making. This may not make sense, but it is the reality in some jurisdictions depending on the state. Also, when applying for memberships at service businesses, the business may require a check. Financial institutions, regardless if you are applying for a loan, may check prior to joining.
In theory, avoiding credit is a great way to make life more secure and affordable because you can avoid interest as high as 23 percent or more on credit cards. Student loans are a huge burden for many and if you can avoid the predicament and still gain employment that pays a great salary, you are in great shape. Many are not so lucky. In reality, the goal should be to use credit responsibly and not use it without considering the actual expense and dissociating the card from any actual money obligation. It is necessary for most people and to avoid it altogether will not make life absolutely easier. It may actually make it harder.
