This is a guest post from my friend Will at Former Banker. Check out his site – it’s new and quickly filling up with posts about everything from video games to real estate.
I have no credit! This is not a cry for help. Heck, I’m not even in the least apologetic about it. That’s just the way it is, and will be for the foreseeable future. I have tried to get credit and build a credit history. I’ve just never been given the opportunity to get the ball rolling. And I’ve stopped trying.
J.P. Morgan Chase is my bank. That’s where I keep my personal and business accounts, so it stands to reason that they would be my first choice for getting a credit card. Unfortunately, their credit approval process is based on credit history. Since I have no credit history, I can’t get a credit card from them. They don’t offer secured credit cards.
After a shopping spree in preparation for a job interview last summer, the gentleman at the register strongly suggested I apply for a Macy’s card. I thought “Why not” and did. I was told that basically everyone gets approved for those cards, so I was optimistic. I would finally get the chance to start building my credit, plus I’d gain access to all the exclusive Macys coupons for cardholders. About a week later, I received a letter stating that my application had been declined for insufficient credit history.
Bank of America Part I
Earlier this year I got an offer in the mail from Bank of America for a credit card. I got all excited and failed to notice that it wasn’t a pre-approved offer. After going through the whole application process over the phone, the lady matter-of-factly informed me that I was declined because of insufficient credit history.
“But you guys sent me the offer!” I said. That’s when I learned that the marketing and credit divisions work independently (which is of course the best way to do things, right?).
Bank of America Part II
This summer, I decided that, well, it was time for me to do something about this “no credit” business. So I decided to go back to Bank of America, explain my situation, and apply for a secured credit card. I opened an account with them, signed all the documentation, and was told that within 2 weeks I would receive my credit card. Off I went, but the credit card never came.
When I called the credit division to find out what was going on, I was told that the branch where I had applied had to use the deposit to write a money order, which would be sent to the credit department along with my application. They apparently hadn’t received anything. I believe my application was somehow lost because months after I had applied, my deposit was still there and available for me to spend. Of course I spent it!
Out of the blue, shortly thereafter, I received a letter from Bank of America. I had been pre-approved for a secured credit card!!! I ignored it.
What are the cons of having no credit?
- I have to be ready for ANY emergency life throws at me. I don’t have the option of charging anything and paying for it later. I either have to have the money or be able borrow it.
- Renting a car with a debit card is not easy. The companies that allow you to reserve the car with a debit card usually have hefty deposit requirements, which sort of defeats the purpose if you’re on vacation and need access to your money.
- Many hotels require a credit card on file when checking in. Last summer I went to South Beach with my girlfriend. Even though our stay was entirely paid for, the hotel insisted they have a credit card on file for any damages to the room. My girlfriend provided hers and all was well, but the point is they wouldn’t have accepted my debit card.
What are the pros of having no credit?
- I have no debt! No need to elaborate on that.
- I am forced to adjust my lifestyle to my income. If I can’t pay for something in cash, I can’t go ahead and buy it anyway. The aforementioned trip was a gift to my girlfriend: I had to have the cash on my account in order to book it. I couldn’t charge it and then worry about it later.
Having no credit really hurts when I’m investing in my business. Having access to a credit card or line of credit would have allowed me to make it grow much more rapidly.
Living with no credit is not an optimal situation. I am well aware of the limitations that come with it and it’s something I plan on addressing in the future. On the other hand, I think I’ve done pretty well without it, since it forces me to be more disciplined with my money and what I can afford.
Do you have a “living with no credit” story? What do you think is worse, having no credit, or having bad credit? Feel free to sound off in the comments.