One New Year’s resolution that is starting to gain traction revolves around completely stopping the use of credit cards. Now, while it’s true that there are some financial experts that seriously believe this is a good idea, but this isn’t as great of an idea as you might imagine. For starters, your credit score doesn’t get better unless you continue to work at your credit score. In other words, if you just stop using credit you won’t have a credit score over time. This is because eventually, your credit history goes blank and you essentially have to get started all over again. When you’re trying to shoot for big ticket items, lenders need to make sure that you will be able to handle yourself no matter what type of circumstances in life come your way. That’s really the biggest thing that you will have to prove in order to get a new loan. You have to make sure that everyone involved with the underwriting of that loan knows that you will do everything you can to repay the loan properly.
It’s not recommended to stop using credit cards altogether. However, you do need to look at your financial situation and really think about whether or not credit cards are a good fit for your financial goals. You will need to think about what you’re actually giving up if you were to decide to quit using credit cards completely. Do you really want to have trouble down the road when you want to purchase a house? Do you really want to have problems when it comes time to buy a car? Even if you want to apply for some jobs, you will need to demonstrate a solid credit history. Any job in the financial sector or anything that requires working with money will require a solid credit history. You don’t have to have flawless credit, but you do need to demonstrate that you can handle credit.
What most people have to understand is that it’s better to make the most out of credit cards within reason than it is to just give them up completely. As long as you really look at the situation from every angle, there’s really no limit to what you can achieve.
You can use online tools to track your credit card spending — mint.com is one that springs immediately to mind, and it’s a great tool to see your spending over time, which can help you make smarter decisions. You also have the ability to set alerts, which will make it easier to remember when to pay your credit card bills — on-time payments are a big deal in the world of credit, so don’t forget that!
Ultimately, the decision is yours when it comes to building credit. You don’t have to build a credit history, but you will also miss out on opportunities that come only with the presence of credit cards. There’s no reason to fear credit cards, either — would you fear a hammer, a screwdriver, or a power saw? In the latter example, a power saw isn’t meant to be feared, but respected as a tool that can do great things — or cause terrible destruction. As always, the choice is yours as to how credit works in your life.