Is it possible to even avoid debt and have good credit scores?

[Stacey]

I always considered debt to be payment you owe so in that sense of the word, you need to owe money to someone and continually pay money to someone in order to have good scores. If you pay off all your debts and don't use credit of any kind, it seems like your scores will just drop over time. I am not sure about this or not but this is what I have come to make sense of things. Is it even possible to avoid debt and have good scores?

[James]

You know I have put a lot of thought into this topic and building a great credit score while not loading on debt is a challenge. 

The trick is not to think of debt as debt. I like to keep my credit score high just incase I need access to capital rapidly but I do pride myself on living a debt free life. 

We keep our credit cards active as that is all day to day transactions but we don't really look at those as debt since we have the cash to cover the bills. They will be paid before the balance rolls over and they get to start charging interest. Plus we use cards that provide cash back or points for activities we enjoy to do so its like getting a little extra cash and credit balance go up and down during a month so things are still active. 

I like to get my wife a new car every 5 years or so and she likes them brand new so with that good credit score go pull a 0% loan just make sure you have the cash to back it up. 

Pretty much just do not spend more then you have. You can use short term credit facilities so you only need to transfer money from one account to another once a month but never let a balance roll. Your credit score will continue to stay in good shape. 

 

[Sophia]

I have always thought of it the same way as you Stacey and I guess that is why I always had a negative opinion of it. I really like what @Jamessaid though as it makes more sense to view it as a means of balancing scores than actually owing people money.