Lie #9: You need to get a credit card to build your credit.
This has got to be one of the biggest lies of the past century. The constant barrage of advertising telling you how important your credit score is starts with the assumption that you cannot live a decent life without credit. Except for a mortgage, that is simply not true, and you don't need credit cards to get a mortgage. The good credit score people want you to believe only by getting the highest rating can you get the good things in life. The reality is that while a good credit rating can sometimes get you a better interest rate, the flip side is that it will also allow you to buy more things you don't need and get farther into debt.
So how do you buy a house without the fancy credit score? Well, there is: save up enough money until you can buy one like our great-grandparents did. Most people don't have the discipline or patience for that. You will need to find a mortgage company that does its own underwriting. They are professional enough to look at the details of your life instead of just your Beacon score (credit score). You need to ask for a conventional fifteen-year fixed rate mortgage with a payment that does not exceed 25 percent of your take-home pay. You should be able to qualify if:
- You've paid your landlord early or on time for two years.
- You've been in the same career field for two or more years.
- You've a good down payment, normally considered to be at least 20%
- You've no other credit, good or bad
- You're not trying to take too big a loan. A payment of 25 percent of take-home pay is conservative and will help you qualify.
The same principles that apply to gradually building up to nicer automobile work here as well. I remember my father building our first house out of concrete block. Five people, two bedrooms, but we did fine. Over the years, I watched him buy and sell a lot of houses as he changed jobs and locations. He would fix them up and take the profit and buy a little better house. He ended up in a really nice place completely paid for. I wish I would have paid a little more attention at the time to the principles he was living from. But then hindsight is always 20/20.
Lie #10: You need a credit card to rent a car, check into a hotel, or buy online.
Nonsense. A Visa or MasterCard debit card will do all that, while not getting you into debt.