Yes, it’s entirely possible to ruin your credit standing without ever owning a credit card. Any negative information in your credit reports can lead to bad credit, depending on the extent and nature of your credit history. And such negative info can result from things like:
- Missed Loan Payments stay on your credit reports for seven years. Multiple missed payments can lead to default, foreclosure or repossession.
- Public Records include civil judgments, tax liens, orders to pay child support or alimony, and bankruptcy. Most public records remain on your credit reports for seven years. But bankruptcy can take up to 10 years to be erased from your credit history.
- Collections Accounts are unpaid debts that have been sent to a collections agency after numerous missed payments. In other words, they’re unlikely to be the only negative records on your credit reports. Around 30 million Americans have at least one debt in collections, averaging $366per debt. Fortunately, the newest credit score models stop considering collections accounts once they’ve been paid off.
With that being said, credit cards represent a double-edged sword for your credit history. They are simultaneously the best credit-building tools at hand and one of the main reasons a lot of people have bad credit.
In the negative sense, credit cards make it easier to spend more than you can afford to pay back, as evidenced by the billions of dollars in credit card debt that we rack up each year
However, credit cards can be free to use and don’t require you to go into debt. They also report account information to the major credit bureaus each month, helping you either build or rebuild your credit standing. And you don’t even have to make purchases with a credit card to benefit from its credit-improvement capabilities. You can just lock it in a drawer if you don’t trust yourself to spend responsibly.
To sum up, not getting a credit card actually makes it easier to have bad credit because you’ll be forgoing a free monthly dose of positive information for your credit reports. You can check out WalletHub’s editors’ picks for the best starter credit cards if you’d like a recommendation. And you get daily credit score and report updates by signing up for a free WalletHub account.
This answer was first published on 07/03/17 and it was last updated on 08/24/18. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
