Why You shouldn’t Ignore Your Credit and Credit Score

The phrase that’s certainly getting the most buzz these days is ‘living debt-free’ and, while it’s definitely something that most people should aspire to, many people make the mistake of thinking that living debt-free means living credit free. Indeed, many people still consider credit something that ‘happens’ to them rather than something that they can build, manage and protect like an investment portfolio.

There are quite a few people who just don’t like the idea that banks and other financial organizations collect information about them and use it to figure out whether or not they are worthy of being borrowers. Not only does it feel unfair but it also makes correcting mistakes rather difficult. That being said, consumers should also realize that having a solid and positive credit history can have a positive impact on their lives  and in most cases it is much better to have this credit history then to have no credit history. Here are a few reasons why;

Without any type of credit history your possibility of getting a home mortgage is going to be greatly reduced. In some cases the only choice that a person with no credit history has is to either rent an apartment or home. The extra problem here is that, when renting, many times you will be forced to pay a huge upfront fee in order to be able to move in if you have very little or no credit history. If this is the case you may be forced to put down a huge deposit, find one or more roommates or possibly even convince a friend or family member to cosign the lease agreement with you,  All problems that could be avoided with a decent and positive credit history.

Without a solid credit history, if you get into a financial crunch such as losing your job or getting hit with a big medical bill, you may find that you have very few options to get emergency cash and stave off bankruptcy. Without a solid credit history you may be forced to consider a car title loan with its annual interest rate of approximately 300%, or a payday loan which can A whopping 400% interest rate to keep you out of the poorhouse. In many cases these will be the only options available for people with poor or no credit history.

If you’re planning on going on vacation and you’d like to book a hotel in advance, purchase airline tickets online or reserve an automobile, it’s going to be very difficult to do that if you don’t have credit and at least one viable credit card. In many cases you’ll have to  jump through all sorts of hoops in order to be able to reserve your room and your car and, in general, you’ll end up paying more money than if you were able to make these purchases using your credit card and booking online as well as in advance.

Are you looking for a job? In today’s economy, with unemployment at a very high rate, it’s very possible that you said ‘yes’. If that’s the case, not having a solid credit history may make it harder for you to find that job and, although some states have enacted laws to limit it, many employers are accessing credit reports today as a prerequisite to hiring a new employee.

If you’re keen on opening your own business and you need capital, finding that capital is going to be very difficult if you don’t have a solid line of credit and at least a decent credit history. The fact is, if you have a strong credit profile you’ll be able to borrow money at  a more attractive interest rate and leave more of your disposable income to invest in something else.

Simply put, credit can be used as a powerful wealth building tool. If you can qualify for an auto loan you may well be able to get a better car and a better paying job because of it. Credit will help you to get a mortgage and become a homeowner, one of the cornerstones of wealth and long-term financial stability. Tracking your spending, earning rewards and building a solid credit profile can easily be done when you have a credit card or two and you promptly pay them off at the end of every month. This can also help you  to get through tough times when cash is tight, if necessary.

The only thing that you need to do in order to build good credit is to spend responsibly. That means not using credit cards like they’re cash (because frankly they aren’t) and realizing that, if there’s no cash to pay for what you want to purchase, you  should definitely consider not making said purchase.

Yes, managing your credit requires a bit of hard work and diligence but the payoff can be quite high and lead to a  better life on many levels. It’s for that reason that you should make an effort to build a solid credit history, even if you’re not a huge fan of credit cards.

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