But is credit really a necessity of life?

Remember, credit cards haven’t always existed. Before the 1960s hardly anyone had them and it wasn’t until the 1970s that their use became widespread.

If you don’t have credit cards or the ability to borrow, what does that mean? It means that you can only buy things that you can truly afford.

Yes, we all WANT a bigger, newer TV, a new wardrobe every season, a visit to the best salon in town, a vacation by the sea every summer and a ski trip every winter, $200 workout shows…but we don’t need them. And if we can’t afford to pay for them, should we borrow money and go into debt to do so?

If you want to buy plane tickets and rent a car…get a debit card. And make sure that you have the money in your account before you try to purchase anything.

Get used to shopping consignment stores, thrift stores, and discount shops like Costco or Sam’s Club.

If you need money and don’t have enough in your bank account…work longer hours, get a second job, or sell off some of your possessions. There is no such thing as free money – any money that you borrow now, you must repay later or your credit will again be ruined.

And if you pay for something yourself, all at once, you are paying the real price for that item. If you pay for something on credit, you may pay two or three times the price of that object over the lifetime of the loan.

So if you’ve trashed your credit, don’t be so quick to try to qualify for new credit cards again. Life without credit can be better than you think. It’s certainly better for your finances.

Unfortunately, wrong.

This hurts your credit score, and in more than one way.

Credit scoring companies examine your credit history, and they want to see older lines of credit because they want to know how you handle credit. If all of your lines of credit are brand new, they feel they don’t know enough about you and your history and are going to view you as more of a risk than someone with a long, well established line of credit.

Also, it reduces the amount of credit that you have available. That seems like a smart thing to do, right? Not in the eyes of the credit scoring companies. They want to see that you have charged no more than 30 percent of your credit limit (for a perfect credit score).

Okay, so how about never charging anything? That should be a smart money move, right?

Again, what’s good for you and your wallet and your budget is not necessarily good in the eyes of the credit scoring company.  If you never charge anything – they don’t know what kind of credit risk you are. The ideal solution is to charge, but to pay off your balance every month, on time. Or at least pay off most of your balance.

Okay, so if charging nothing is bad, then you should charge a lot, right? Only if you can pay off most of it and if you don’t charge too close to your credit limit. If you have a $10,000 credit limit but have charged $9,000, this will severely hurt your credit score.

The best thing to do to get a good credit score is have a couple of credit cards that you pay off every month, on time, and that you do not close. Let those credit cards age, keep your balance low, pay your bills early or on time, and you will be the golden child in the eyes of credit card companies.

1.) Thou shalt learn the difference between “needs” and “wants”.

2.) Thou shalt not use credit to purchase expensive toys.

3.) Thou shalt create a budget and stick to it.

4.) Thou shalt not covet they neighbor’s mortgaged-to-the-hilt McMansion, nor his soon-to-be-repossessed Ferrari, nor the big screen TV he will be paying off for 5 years at 28 percent interest.

5.) Thou shalt set aside money for emergencies every month.

6.) Thou shalt not spend more than you earn.

7.) Thou shalt not live beyond your means.

8.) Thou shalt not open any new lines of credit.

9.) Thou shalt teach thy children from an early age how to manage money responsibly.

10.) Thou shalt not ever make late payments, because they ruin your credit.