It amazed me to actually meet someone without a credit history, not a bad credit history, but no credit history because this person has always paid for everything with cash.
We live in a society that runs on credit. There is always a business out there to extend credit to you so you can buy a house, car, start a business and everything in between.
However, credit isn’t just handed over. A person has to prove their creditworthiness. Lenders base their decision on your three digit credit score.
Even if you’re not looking for a loan for a house or a car, your credit history impacts practically everything you do in this world. Credit determines the quality of your living.
It’s a determining factor on where you live, insurance rates, and even if you gain viable employment, or starting a business. Lenders want to make sure they are dealing with reliable and responsible people.
Even if you are not in the market to buy a house, landlords consider the rental agreement/ lease as a loan. They are loaning you a place to live in exchange for payment. And if your credit history is bad, or you have none you can get denied for an apartment or be charged a higher security deposit and rent than the other tenants for the same living conditions.
Now if you are in the market to buy a car and haven’t saved up for the entire cost, you will need a loan. Your credit will determine the type of vehicle the lender will offer to you as well as the monthly payment and the interest rate.
Most employers check applicants credit history to determine financial responsibility. Their concern also includes making sure that the new hire doesn’t have more debt than the income being offered. Good credit equates to having good character.
If you want to start a business or grow the one you have, it takes capital. And in case you don’t have cash lying around, you will need credit to qualify for a business loan.
Credit is required to get utility service. Gas, light, cable and phone companies do credit checks before extending service and oftentimes require security deposits with stipulations that if one payment is missed, the money is forfeited.
As you see, having no credit isn’t that much better than bad credit because it doesn’t show lenders your ability to pay debt. And unfortunately, your payment history is a reflection of whether or not the rest of your life is on track.
Begin to establish good credit today by opening a bank account, getting copies of your credit reports, and apply for credit with companies who report to the three major credit bureaus.