No Credit History is Worse than Bad Credit
Posted on November 14th, 2009
Perhaps you know someone who is really expert at staying out of debt and who avoids using credit in any way, shape or form. Maybe you’re even one of those rare consumers who sticks to the principle of paying for everything you buy in cash and not buying anything that you cannot afford to pay for out of your pocket. If you are, congratulations for being such a smart and savvy money manager. But you should know that if you have never used a credit card or borrowed money from a bank and paid it back that you may be in worse shape than someone with terrible credit.
That’s because in this day and age – where we live in a debt culture based on excessive borrowing habits – people routinely base decisions on the track record of your credit history. If you don’t have any credit history because you have never needed to borrow money that may be a fantastic testament to your character and to your ability to make wise financial choices. But it also means you are a total mystery to those people who rely on credit history as a yardstick.
To them you are like a person who cannot explain where he or she has been for the past 10 or 20 years or what you have been doing with your life. You probably would not go out on a date with someone who could not answer those kinds of basic questions, you probably would be hesitant to rent to them, and you would likewise be reluctant to hire them to work for you. In the same way those who depend on credit scores to evaluate people will not want to enter into a relationship with someone who has no history. They would even prefer to hire someone who has lousy credit but has a good explanation for their credit problems. Maybe they were sick, went through a divorce, or were young and did not yet understand the importance of maintaining good credit. At least they have a track record, whereas if you have never owned a credit card or used a car loan or student loan you are like a ghost in terms of your financial history. You won’t be able to rent a car, may have trouble renting a house, and will probably not qualify for a mortgage.
To avoid that kind of ridiculous and paradoxical problem, talk to your banker about ways that you can establish credit – without compromising your principles or risking your money – so that you can have a stellar, A-plus credit rating. Once you create a documented paper trail of your excellent credit history it will help to verify and validate the fact that you are trustworthy, reliable, and always pay your bills on time – qualities that are really worth celebrating in this era of too many irresponsible financial habits.
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Tags: Bad Credit, Credit
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