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How I Live Without a Credit Card

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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I am 29 years old, and I’ve never had a credit card – ever. I didn’t know this was unusual until other people were shocked and surprised that I have never had one.

Here are the main points that people like to know about my life without a credit card.

Why? Because I’m a Spender

The main reason I do not have a credit card is because I am a spender by nature. I just like to spend money. Having a credit card would be tempting for me. Some say that I don’t give myself enough credit and that the temptation wouldn’t be as bad as I think. However, these people are wrong. I know they’re wrong because I know myself better than they know me. I’ve actually dipped into my savings before for non-emergencies – just because I wanted something so badly. This is how I know that I cannot have a credit card. If my savings is at risk, I know that a card would be even more tempting for me.

Initially, I didn’t get a credit card because my grandpa told me that “using a credit card was like taking a mortgage out on your clothes”. This sunk in morally for me, and I decided I didn’t need a credit card. His point was more directed at carrying a balance on a credit card, which we can all agree is not a good idea, but I still decided I didn’t want anything to do with it.

Over time, I’ve deciding my personal temptation to spend money is high enough to warrant continuing to not have a credit card. This is why I use my debit card for almost everything.

I Use My Debit Card Like a Credit Card

I use my debit card for almost all of my purchases (the alternative being cash). I always choose “credit” when I’m paying with my debit card, because it’s best to minimize the use of your pincode as much as possible. In addition, Visa and MasterCard both have a business promise to provide zero liability protection on a debit card if you first, take reasonable care to protect your card and second, report the fraud in a timely manner. However, because any fraud on my debit card means direct access to my funds instead of fraudulent charges on a credit card – I take other measures to be proactive about protecting my information. I make sure that my card is up to date, and I’m usually issued a new card every one-to-two years.

I can stay at a hotel, rent a car, book a flight, and do anything else I’ve ever wanted to do by using my debit card. I always make sure I have a small cushion in my checking account, because in some instances, there will be a higher hold charge when using a debit card (e.g.: staying at a hotel).

Personally, I have never had a problem using a debit card as credit. That’s not to say it can’t happen – it just hasn’t happened to me. I know plenty of people who have had problems with credit cards and / or with debit cards. I make sure to monitor my accounts, and pay close attention to my credit so if there is any problem, I know about it immediately.

I Pay Close Attention to My Credit Reports

Because I only use a debit card, I am on heightened alert to pay close attention to my credit. I order my credit reports from the three main credit-reporting agencies (Experian, Equifax, and Trans Union) every year. I look for errors or fraud, and I report any incorrect information immediately.

My Credit Score

The biggest question people have for me is how I keep a high credit score. I have two responses. First, I actually do have a high credit score because of my student loan debt. I monitor it annually, and I know that it’s in good shape. I am aware that this won’t last forever, but it does work for now.

Second, I am not as concerned about my credit score. For me, credit is a “debt score”. Unfortunately, our system measures your creditworthiness based on how much debt you have and have paid off, not on how much you have in assets. For example, you could have $2 million in the bank, but if you never took out a line of credit (debt), you wouldn’t have a credit score and wouldn’t be able to get financing. I wish that the underwriting was different and that assets were measured and included, but since they’re not, I understand the need to have a high credit score if you want to buy expensive things, like a car or house.

My personal financial goal is to be financially free, without debt. I don’t want to take out more debt, so I am not as fixated on having a high credit score.

I am not so naïve to think that I may never need my credit score (particularly if I want to buy a house), but my goal is to live according to my personal values, and not have my credit score be a determining factor in my financial decision-making. I will likely revisit this when my student loans are repaid, but it will probably be in the form of financing something when I have cash in the bank to pay for it solely for the purpose increasing my score, as opposed to using a credit card. I do not foresee me ever using a credit card.

I understand that people without student loan debt may need to use a credit card to get a high credit score, but this just hasn’t been my experience. Personally, I have student loan debt and I am a spender, so it doesn’t make sense for me to have a credit card.

Points I Give Up

People also swear by their credit cards for the points that they get for spending. They go on trips and get material things that I cannot get for free by using a debit card. This is one area where I am aware of the perks I’m missing out on.

For me, I compare the perks I’m giving up on the one hand to the certainty for being consumer debt free on the other hand. I am a spender and I like to buy things. I would much rather not having the temptation and remain consumer debt free than benefit from credit card perks.

I think I could get a few free flights out of having a credit card, which would be amazing on the budget I’m on; however, I am certain it would not be worth it if I got into debt and couldn’t repay my card every month.

This is a personal choice that works for me.

I Don’t Like Debt

I don’t like debt, and I don’t like being tempted to spend more money than I otherwise would. I am committed to repaying my student loans and building wealth. Personally, I am not focused on credit card rewards or building my credit.

I like my life without a credit card, and I plan to keep it that way. It works for me.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Natalie Bacon
Natalie Bacon |

Natalie Bacon is a writer at MagnifyMoney. You can email Natalie at [email protected]

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Life Events, Mortgage

How Credit Report Disputes Can Sabotage Your Chance for a Mortgage

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Mortgage underwriting can feel like it’s taking a lifetime when it’s standing between you and your dream home. But your lender wants to make sure that you’ll be able to repay the loan, so they’ll take the time to go over your credit history with a proverbial magnifying glass.

Before you get to underwriting, you’ll want to make sure you’re a creditworthy borrower. This means maintaining a good payment history, paying down debt and disputing any errors on your credit report.

However, credit report disputes can impact your ability to get a mortgage if they’re still pending when you’re applying for a loan. This guide will explain how and why.

Why your credit reports and scores matter

One of the first things lenders look at is your credit report, which provides information about your credit history. It details whether you’ve made on-time payments on credit cards, loans and other accounts.

The information included in this report is summed up by a credit score that generally ranges between 300 and 850. The higher your score, the more creditworthy you are perceived to be.

Although credit scores aren’t the only factor that determines whether you’ll qualify for a mortgage, your credit score heavily influences the mortgage interest rate you receive. The highest scores qualify borrowers for the best mortgage rates.

Before you begin the homebuying process, it’s smart to review your credit report and have a copy handy. You can request a free credit report once a year from each of the three major credit reporting bureaus, Equifax, Experian and TransUnion, at AnnualCreditReport.com.

It’s critical to arm yourself with this information in advance. That gives you the opportunity to dispute any inaccuracies you’ve discovered and clean up your report.

What is a credit report dispute?

Credit report inaccuracies are relatively common. Inaccurate information can happen for a variety of reasons — a credit card payment being applied to the wrong account or duplicate accounts in your report giving the impression that you carry more debt than you actually do, for example.

Not only can errors harm your credit score, but they can prevent you from qualifying for a new credit account, such as an auto or home loan. That’s why it’s important to regularly keep track of the information found in your credit reports.

When you review your credit report and find an error, you have the opportunity to formally dispute it under the Fair Credit Reporting Act This is the first step to take to get the error corrected or removed.

Fortunately, it’s easier than ever to file a credit dispute with all three credit reporting agencies online.

How to file a credit report dispute

If you’ve found an error on your credit report, take the following steps to dispute it:

  1. Provide your contact information.
  2. Identify the items in your credit report that are inaccurate.
  3. Explain why you’re disputing the info and include documentation to support your dispute.
  4. Request a correction or deletion.

You’ll also want to reach out to the creditor that is reporting inaccurate information to the credit bureaus. Let them know you’re disputing the information and provide them the same documentation you’re giving to the bureaus.

In many cases, the credit bureaus investigate disputes within 30 days, according to myFICO.com.

However, many disputes can go unresolved for long periods of time, which can be troublesome for consumers applying for a mortgage. Many loan applicants don’t realize an open credit report dispute can raise a red flag to lenders and may even prevent mortgage approval.

When to file a credit report dispute

You’ll want to file a dispute as soon as you spot an error on any of your credit reports, but if you’re thinking about buying a home in the near future, it’s best to exercise caution when filing disputes, especially right before you apply for a mortgage.

Although the dispute investigation can wrap up in 30 days, it could last as long as 90 days, so it’s best to avoid filing new disputes a few months prior to starting the homebuying process.

How mortgage lenders view credit disputes

When a dispute is filed, credit reporting agencies are required to label the item as “in dispute.” The dispute itself doesn’t impact your FICO Score. However, your score may temporarily deflate or inflate while the disputed items are being investigated.

Mortgage lenders know credit reports with disputed items don’t paint the most accurate picture of a consumer’s creditworthiness and many require this status be removed before approving a mortgage application. This leaves some consumers with a difficult decision to make — accept costly credit report errors or delay applying for a loan until disputes have been resolved.

Here’s how lenders who provide conventional and FHA loans consider credit report disputes when determining whether a consumer qualifies for a mortgage.

Conventional loans

Both government-sponsored enterprises, Fannie Mae and Freddie Mac, have automated underwriting systems that alert lenders to existing credit report disputes. These entities don’t issue loans, but buy mortgages from lenders that follow their rules.

Fannie Mae’s system initially reviews all accounts on a borrower’s credit report, even those that are being disputed. If the borrower would be approved for the loan even with the account in question, the loan moves forward. But if the disputed account would push the borrower into the “rejection” category, the system will direct the lender to investigate whether the dispute is valid.

Lenders using Freddie Mac’s system are required to confirm the accuracy of disputed accounts. The borrower would need to have the accounts corrected before the loan can move forward.

FHA loans

FHA-approved lenders require borrowers with disputed delinquent accounts on their credit report to provide an explanation and supporting documentation about their dispute. If the account has an outstanding balance of more than $1,000, the loan must be manually underwritten, which means the loan officer has to review the loan application and supporting documents outside of the automated system.

The loan officer goes over the paperwork included in the borrower’s file very closely to determine their risk of mortgage default and whether they qualify for the loan program that they’re applying.

Disputed medical accounts are excluded from consideration, but disputed accounts that are paid on time must be factored into the borrower’s debt-to-income ratio.

How to remove a lingering credit report dispute

Gaining access to a new credit report with updated information is not an option for the borrower if the creditor won’t correct the information. And when a consumer files a complaint with the credit reporting agencies, the agencies will often defer to the creditor.

Just as you’ve reached out to your creditor and the credit reporting bureaus to file your dispute, you’ll want to take the same action to remove it. Contact the creditor directly and request that they update the account information to show that it’s no longer being disputed.

You may also want to reach out to Equifax, Experian and TransUnion to request dispute removal, but keep in mind they may also reach out to the creditor who is reporting the disputed account. See the FICO website for more information about contacting each bureau’s dispute department.

The bottom line

Dealing with an unresolved credit report dispute can turn into a consumer nightmare. Even if you’ve followed best practices, you may still be unhappy with the results.

Fortunately, you can still submit a complaint to the Consumer Financial Protection Bureau. They will forward your complaint directly to the company in dispute and work to get a response from them. Another option is to seek guidance from a consumer advocate or an attorney. The National Foundation for Credit Counseling may be a helpful place to start.

Credit reports and scores have such a strong influence on lifelong financial health, so the most effective defense is to be proactive about making sure yours are in the best shape possible. Regularly monitoring your credit profile and working to fix inaccuracies before applying for a mortgage is a good game plan to prevent major problems as you embark on the homebuying process.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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