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Wednesday, July 23, 2008

Life Without Credit is Expensive?

I was just reading an article that talked about how expensive it is to not have credit. I found myself shaking my head as I read. The author talked about how folks with no credit would have to 'do without' cars and washing machines-- I thought--Huh?

My thought is what you need is SAVINGS not CREDIT. Also-- you need to have some tools and skills and be content with things that aren't brand spanking new.

We have older cars. We don't have any car loans, all the cars are paid for. When something goes wrong with them we fix them. We save on insurance because we don't have to carry comprehensive insurance--if we wreck the cars we will have to buy new 'old cars', but so far that hasn't happened and we have savings to cover that. If something very very major goes wrong mechanically--we will debate fixing them vs. buying a different older car. Almost always fixing wins.

We are not going without any major appliances either. All major appliances can be had for less second hand. Often nearly new major appliances can be bought for less than $100. The last washing machine I bought works perfectly and looks fine--it was $50 on Craigslist. I pulled that cash out of my pocket and didn't pay one cent of interest on it. I only had to earn it one time.

The article I was reading came in this weeks Dollar Stretcher and I was sort of surprised by the contention that it is 'more expensive' to live without credit. I thought HOW can such a case be made? It is so untrue! It is buying things you can't afford that is expensive-- duh.

Some folks say you need credit for 'emergencies' I'm thinking that is not really true--if you have enough cash in the bank to cover an emergency and proper insurance you will never find yourself 'charging' an emergency.

The one thing I am not sure about is if you really need credit for a house. We are renting currently, having been 'indebted home-owners' in the past. We have been saving up and watching and learning and pondering how to manage the jump to home ownership sometime in the future-- if possible without a bank loan. We shall see if that ever does turn out--it may be the only thing most folks would have to 'do without' if they don't have credit. Even so, I can't see renting a nice place as living a truly deprived life, its just not that way.

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