A friend of mine is trying to refinance their family home in his name so they no longer have to worry about his brother making the mortgage payment. Unfortunately this could be very challenging for him because he pays cash for everything. He has very little credit unless he can find a lender that accepts alternative credit like electric bills, phone bills, and other items paid on-time.
While it is great to avoid debt and pay cash for everything, it is also vital to somehow someway have good credit for big ticket items. From Smart on Money,
Your financial habits are of immense interest to a number of people that you might not realize. Some banks check your credit before allowing you to open certain types of accounts. Even if a full credit check isn’t done, a ChexSystems check might be used to look at some of your consumer behavior. You can be denied a bank account based on what’s in certain consumer reports.
Additionally, one of the biggest impacts come when insurers occasionally check your credit score. I am actually receiving a discount on my bundled home-aut0-life policy because of my credit score. A poor credit score means that you can miss out on monthly savings in the form of lower insurance premiums. Over a lifetime, a savings of $10, $20, or $30 a month can make a real difference.
Having credit does not mean you will be in dire credit card debt. You can have a credit card and pay it off every month or two. You can buy a piece of furniture on credit and pay it off with a six months same as cash program. There are ways to establish a good credit report.
Leave a Reply