When she turned 18, Jessica from South Carolina discovered her mother had been utilizing her Social Safety quantity since she was a toddler — racking up $186,000 of credit-card debt in Jessica’s title.
After hiring a lawyer, Jessica was in a position to have her credit score cleaned, however she’s left with zero credit score historical past and may’t get a bank card.
She known as into The Ramsey Present to learn how she may recuperate from having her credit score historical past wiped. “Not even a safe bank card will contact me,” she stated.
Jessica feels “caught” and says she will be able to’t even purchase a automobile with a co-signer. Whereas she says some monetary advisors prompt her “most suitable choice” is to get married, co-host Ken Coleman flagged that suggestion.
“I wish to problem this concept that you just’re caught as a result of you haven’t any credit score rating and that it’s important to get married in an effort to have a automobile,” he stated.
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Nor wouldn’t it essentially remedy her situation. Whereas credit score scores aren’t impacted by marriage, if a married couple collectively applies for financing on a big buy, comparable to a house or automobile, Equifax says lenders often examine each spouses’ credit score data.
So what’s the answer?
It entails a reasonably large “paradigm shift,” in keeping with co-host Rachel Cruze. Jessica is targeted on residing her life round “having a terrific credit score rating.” However, as Cruze factors out, “primarily you employ a credit score rating to enter extra debt.”
That paradigm shift entails residing debt-free — with out a bank card.
Take into account that Individuals owe $1.18 trillion in credit-card debt as of Q1 2025, in accordance in keeping with the Federal Reserve Financial institution of New York.
And the typical credit-card debt, per American, was $6,371 throughout this identical interval, in accordance to TransUnion’s Q1 2025 credit score trade insights report.
Plus, excessive annual proportion charges (APRs) on bank cards could make it even tougher to get out of debt.
“Though Federal Reserve fee cuts started in 2024 after two painful years of fee hikes, common credit-card APRs are nonetheless properly above 22%, providing no aid to customers who revolve balances from month to month,” in accordance to Experian.
Because of her credit score being wiped, Jessica is debt-free. She doesn’t even have the choice to use for a bank card to get into extra debt, “so see that as a blessing,” stated Cruze.
Whereas Jessica has a full-time job as a debt collector and makes $19 an hour, Cruze suggests she search for a aspect gig (or a higher-paying job) to earn some more money every month that she may put towards a automobile.
If she made an additional $2,000 a month, for instance, she may save sufficient to pay money for a $5,000 to $7,500 secondhand automobile in a matter of months — no bank card required.
In a survey by Forbes Advisor, 58% of respondents stated card funds are “their prime facilitator of upper spending,” which is “a mirrored image of the convenience and maybe the much less tangible nature of utilizing playing cards over money, which appears to loosen the psychological purse strings.”
And greater than half (52%) of respondents are “extra more likely to make an impulse buy when paying with a card in comparison with simply 24% with money.”
“Society tells us it’s important to have a bank card to outlive, you’ll be able to’t go to school with out pupil loans and also you’ll at all times have a automobile cost. These are straight-up myths,” in accordance to a weblog by Ramsey Options.
Alternatively, residing debt-free means “not shopping for something until you’ll be able to pay money.”
Cruze says to begin by arising with an in depth finances and figuring out precisely how a lot you’ll want for primary requirements comparable to meals, shelter, utilities and transportation. The whole lot else can go towards saving up in your largest wants — in Jessica’s case, that may be a automobile and her final semester of school.
“As you observe your spending, you’ll see crimson flags and the way shortly you get to the purpose the place you’re spending greater than you earn,” in accordance to the Credit score Counselling Society, which recommends utilizing money as an alternative of playing cards.
“Money-only diets are a terrific wake-up name to your spending since you bodily see the cash alternate and really feel the drain in your pockets.”
In case you have a number of bank cards, contemplate consolidating your debt onto one card (the one with the bottom rate of interest or finest phrases) and cancel any playing cards you don’t want. You’ll additionally wish to construct up an emergency fund so that you gained’t must depend on your bank card if you happen to abruptly want cash for an emergency.
Whereas Jessica is “blessed” with out a bank card, these trying to get out of debt can use methods such because the snowball or avalanche technique to whittle away high-interest debt.
Most definitely, it would additionally contain growing your earnings (working extra time, on the lookout for a higher-paying job or taking up a aspect gig) whereas decreasing your expenditures (slicing again on something pointless, comparable to takeout, journey and leisure).
To appreciate even larger financial savings, you can additionally have a look at methods to simplify or downsize. For instance, is your lease consuming up most of your earnings every month? If that’s the case, it might be time to have a look at discovering a smaller place, getting a roommate or shifting to a inexpensive neighborhood (although you’ll additionally must think about the price of shifting).
“Don’t be leaning on the credit score trade to get you out,” Cruze suggested Jessica. In different phrases, getting a bank card isn’t going to resolve her points; it would solely serve to get her into debt.
And, suggested Coleman, “don’t get married on the recommendation of a monetary advisor so you may get a automobile.”
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This text offers data solely and shouldn’t be construed as recommendation. It’s supplied with out guarantee of any variety.
