6 Big Reasons You Need Credit

Man looking at credit options on computer screenNow that you’re familiar with what credit is, how credit reports are created, and where credit scores come from, you might wonder: “Why do I even need credit?” Can’t you just pay cash for everything from now on and forget all this?

Here’s 6 Major Reasons Why You Need Credit:

  1. Access. When you use credit cards responsibly, you have access to perks like extended warranties, price protection, and travel upgrades. When used within the boundaries of your budget, you can spread out the payments on a big-ticket item over time. Credit grants you access that you just can’t get with cash.
  2. College. In 2016, the average US household had almost $50,000 in student loans. A clean credit report and a high credit score mean that you’ll be paying the lowest interest rate possible on those loans.
  3. Homebuying. Could you buy a house with cash? Sure! Could you do it anytime soon? Probably not. The best mortgage rates are only for borrowers with the best credit scores. Anything under 600 – which is considered ‘poor’ credit – will make home financing very difficult, if not impossible.
  4. Employment. Employers can’t see your credit score, but they can check out your credit report. A report full of black marks could be a red flag and cost you a job.
  5. Insurance. When you shop for car, life, and renter’s insurance they check your credit score. The best rates go to the customers with the highest scores.
  6. Safety. Of course you can use your debit card to shop online and in stores – but what happens if you lose it? Or if there’s another data breach? If your bank account information becomes compromised, you could lose everything.

If you want to travel, go to college, buy a home, have a job, and insure all the parts of your great life then you need credit. Having “good credit” isn’t just about having a bunch of cards with available money to spend. It’s about making on-time and in-full payments, paying down your debt, and keeping your record clean.

Your credit report is a signal to businesses that they can take a risk on you. A high credit score and a clean report tell them that you pay your bills, you’re a better employee, and you won’t file a ton of insurance claims. If you avoid credit you’re telling them nothing. They won’t know that you’re all those things and deserve a fair shot.

How do you build credit?

Repairing the damages on a credit report and raising your credit score is hard work – but you can absolutely change your history. Understanding the terminology, contacting the lenders, negotiating rates and payments, adjusting your lifestyle, and knowing when it’s the right time to contract a professional are all parts of a debt repayment strategy.

Will it be easy? Nope. Just like else worth working for, it will be challenging. But after a while, your on-time and in-full payments will have a positive effect on your credit report and your score will go up.

Posted on July 11, 2017 by in Credit Monitoring

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