Do I need to have debt to build credit? – Credit Tips
One of the most common questions we get is; “Do I need to have credit card debt to build credit?”
Short answer: NO…absolutely not. We were not placed on this planet to spend our lives working to give credit card companies endless loads of interest and fees. The fact of the matter is that we need credit to get credit but we do not need to be in credit card debt to build our credit. For example, if you do not carry a balance on your credit card the card company will still report an on-time payment to the credit agencies by default. 25% of your FICO score is based on balances and the largest part of that 25% is your proportion of credit card balances vs. your limits. The lower the ratio, the better. A 0% ratio is ideal. Who could be a more desirable person to lend to than the person that has a stack of credit cards in their wallet but never submits to the temptation to use them???
I can’t tell you how many times I’ve pulled up a report of someone that thought they had bad credit because of their “Lack of Debt” and then to their surprise they have scores over 750.
Banks and credit card companies are always giving people advise that involves actively using your credit cards to build up your credit. Remember, bankers are usually getting their advise through the sales training given by their companies. Their companies business model needs you in debt. It’s a billion dollar industry. Seeking unbiased credit and financial advise is a KEY to making the right decisions.
Nikitas Tsoukalis, President
Key Credit Repair