Tuesday, January 22, 2013

Can you REALLY buy a house without a credit card?

This question was presented to me today.  At the time I had no answer.  In my younger days I had done all the "worldly things" to build an "I love debt" (a.k.a FICO) score.  Before I was 18, I had piggybacked on my parents good credit and got a credit card where they were the co-signer.  This was to be used in case of emergency when I was traveling without them.  Never needed it but there was the security of knowing that mom and dad's money could bail me out if I ever got stuck (eg. the bus left without me or I had some type of medical emergency).   They also had me put my college textbooks on it so they could pay for them without actually being there.  In my quest for independence because I've always been a "Me DO!" kind of girl, I tried to get a credit card on my own at college before I turned 18... got denied... but thanks for the free pizza and t-shirt.  If I remember right, even Kohl's turned me down for a card when I was 19.  Finally I got one from First USA and felt grown-up, responsible... and poor.  Everything I made I always seemed to spend.  Given what I know now about the psychological and physical response to spending via credit card versus cash, I'm not surprized.  The good news is I always paid it off so my credit score just kept going up.  The next thing I know, I'm married and trying to buy my first home.  They run our credit scores and we are cleared for a 30-year mortgage for a lot of money.  Woo Hoo! 

Now let's fast forward... I am not the same person I was at 23 and a number of my ideas about money handling have changed.  I have three kids and my goal for them is to NOT follow the path I took but rather the path I teach.   We live on a cash budget now.  If we don't have the money, we don't buy it that moment.  We save up to purchase cars, TVs, computers, vacations and anything else big ticket.  The last thing we have to pay off is the house and with focused determination (NOT luck) we will pay our 15-year mortgage off 5 years early.  Yes, I said I had a 30 year mortgage earlier... that was 3 houses ago too.

 So that brings me back to the question "Can you buy a house without having a credit card?"  I had to do some digging but the answer is YES!  I found an example of how a family was able to purchase a home without opening a credit card.  The mortgage process was a bit more convoluted than the mainstram method of obtaining a mortgage but people who don't have credit cards and only rely on cash/debit are not mainstream... yet!  What impressed me most was the fact it was done with a big bank.  Kudos to Wells Fargo for going old school.

Check out the story at Simple Mom's blog.


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