The Other Side — Should You Avoid Credit Entirely?

You hear it from a friend who paid off every debt, and from money shows: skip credit, pay cash, forget your score. Maybe a card balance has hurt you before. Now you're deciding whether to open your first card or close the ones you have. Both choices have costs, and the decision is yours. Here are the facts on each side.

You can avoid debt without avoiding credit: a card paid in full by each due date usually costs no interest and can still build a US credit history.

What does the no-credit argument get right, and what does it miss?

Dave Ramsey, founder of Ramsey Solutions and host of The Ramsey Show, argues for living debt-free with no credit score. His company's guide says: "Around here, we like to say a credit score is just an 'I love debt' score." The guide's reason: a score "rates how much you juggle debt." It also says: "You don't need a credit score."

He is right that a carried balance costs real money. Example: you carry $5,000 on a card. In August 2026, bank credit card accounts that were charged interest had an average rate of 22.36% (Federal Reserve, preliminary).

• One month of interest: $5,000 × 22.36% ÷ 12 ≈ $93
• One year, if the balance stays at $5,000: $5,000 × 22.36% = $1,118

Now charge only what's already in your checking account, and pay the full statement balance by each due date. If your card has a grace period and you start with no balance, you can avoid interest on new purchases. Most cards have a grace period on purchases, though issuers don't have to offer one.

Where it goes too far: a good score doesn't require carrying debt. The CFPB says: "You don't need to carry a balance on credit cards to get a good score. In fact, you don't need outstanding debt at all."

A US credit file also matters beyond loans. Landlords, insurers, and phone or utility companies may use your credit report, and so may an employer if you agree. If you keep carrying a balance, though, paying it off comes first.

Can I get a mortgage with no credit score?

Ramsey's guide says you can, "as long as you find a company that still does manual underwriting." That's possible, with strict rules. If a borrower has no score and the loan is underwritten by hand, Fannie Mae's rules for loans it buys require:

• 12 months of payment records on four bills, such as rent, utilities or insurance, for each borrower without a score;
• a one-unit principal residence (your main home), for a purchase or limited cash-out refinance;
• total monthly debts of at most 36% of income: on $5,000 a month, $1,800, the new mortgage payment included;
• savings or other financial assets left after closing, worth 12 monthly mortgage payments, unless one of those bills is rent or another housing payment.

What can I do in the next 10 minutes?

Look at what you've been avoiding.

• If you carry a card balance: multiply the interest charged on your latest statement by 12 (where a statement shows interest). That's roughly a year's cost at this balance.
• If you don't carry one: get your free credit report from one bureau at AnnualCreditReport.com (free every week) and see what's on your US file.

In a field experiment with over 400,000 student loan borrowers, those told their FICO Score was available made fewer late payments and less often overestimated their scores (Homonoff, O'Brien & Sussman, 2021).

Can you pick the plan that fits both goals?

You want a US credit history, and you never want to pay card interest. Which plan fits both goals?

• A. Carry a small balance from month to month
• B. Put one regular bill on a card and pay the full statement balance by each due date ✅
• C. Pay cash for everything and open no accounts

Why: Paying the full statement balance by the due date usually means no interest on purchases, and you don't need a balance to get a good score; A usually costs interest, and C leaves no account to report.

Where do these facts come from?

1. Ramsey Solutions — "What Is a FICO Score?" (published 2022-06-21, updated 2025-08-11), https://www.ramseysolutions.com/debt/what-is-a-fico-score; "Dave Ramsey" (no page date), https://www.ramseysolutions.com/dave-ramsey · Verified 2026-10-10
2. Federal Reserve — G.19 Consumer Credit, release of 2026-10-07: credit card plans, accounts assessed interest, August 2026 (preliminary). https://www.federalreserve.gov/releases/g19/20261007/ · Verified 2026-10-10
3. CFPB — "What is a grace period for a credit card?" (last reviewed 2024-09-23). https://www.consumerfinance.gov/ask-cfpb/what-is-a-grace-period-for-a-credit-card-en-47/ · Verified 2026-10-10
4. CFPB — "How do I get and keep a good credit score?" (last reviewed 2024-12-12). https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/ · Verified 2026-10-10
5. CFPB — "What is a credit report?" (last reviewed 2024-01-29). https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-report-en-309/ · Verified 2026-10-10
6. Fannie Mae Selling Guide — B3-5.4-01 "Eligibility Requirements for Loans with Nontraditional Credit" (2025-11-05), https://selling-guide.fanniemae.com/sel/b3-5.4-01/eligibility-requirements-loans-nontraditional-credit; B3-5.4-02 "Number and Types of Nontraditional Credit References" (2026-02-04), https://selling-guide.fanniemae.com/sel/b3-5.4-02/number-and-types-nontraditional-credit-references; B3-6-02 "Debt-to-Income Ratios" (2025-04-02), https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios; B3-4.1-01 "Minimum Reserve Requirements" (2024-08-07), https://selling-guide.fanniemae.com/sel/b3-4.1-01/minimum-reserve-requirements · Verified 2026-10-10
7. FTC — "Free Credit Reports" (June 2026). https://consumer.ftc.gov/articles/free-credit-reports · Verified 2026-10-10
8. Homonoff, O'Brien & Sussman — "Does Knowing Your FICO Score Change Financial Behavior? Evidence from a Field Experiment with Student Loan Borrowers," Review of Economics and Statistics 103(2), 2021, pp. 236–250 (NBER Working Paper 26048, July 2019). https://www.nber.org/papers/w26048 · Verified 2026-10-10