You've probably heard a lot about the importance of a good credit score. However, many people point out that they don't use credit cards, and they already have a house, and they buy used cars with cash. For those folks, it seems as though there is no need to worry about a credit history. The truth, though, is that even if you live an all-cash lifestyle, your credit history might still matter.
You Are Judged By Your Credit History
Fair or not, service providers and others make assumptions about you based on your credit history. Your credit history is no longer only a peek into how you have handled borrowed money in the past; it is also used to measure your general level of responsibility in various aspects of your life. Auto insurers think that your fiscal responsibility translates directly into your responsibility on the road. A lower credit score = a higher insurance premium.
Employers might decide that if your credit history shows what might be considered questionable financial habits, your work habits might not be desirable. On top of that, if you apply for a job of sensitivity, you might be suspected of being vulnerable to bribe attempts. What if you are required to handle cash? A sketchy credit history might red flag you as a potential embezzler.
None of this may be true, or fair, but it is a judgment that is made when people look at your credit history. Landlords and cable TV providers might also check your credit history. They want to know if you will cause potential problems when it comes time to make payments. Even some banks check your credit history before allowing you to open an account. A poor credit history can cost you more than just higher interest rates.
Be Prepared: What If You Do End Up Needing a Loan?
Even if you are convinced that your job is stable, you can live with a slightly higher insurance premium, and you don't need cable TV, you never know when circumstances might mean that you will need a loan, or to get a credit card. Your car may be unexpectedly totaled, and you may need to buy something else on short notice, necessitating an auto loan while you wait for the insurance check to arrive. You might end up with an emergency medical procedure that results in the need to have good credit to qualify for a payment plan.
There are any number of unexpected problems that can force you into getting a loan, even if it is only for a short period of time. Keeping up with your credit history, and making sure that it reflects your solid financial habits is part of financial preparedness. The good news is that building a good credit history doesn't have to mean going into debt. You can get a credit card and use it occasionally, for planned purchases, paying off the balance without paying interest. Make all your payments on time, and encourage your utilities and others to report to alternative consumer reporting agencies like PRBC.
Hopefully, with interest in alternative consumer reporting picking up steam, there will be more focus on good financial habits in general, and less on borrowing behaviors. But, until then, it's wise to be prepared and make sure you have a good credit history.
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