Do I Really Need Credit and a Good Credit Score?
This is a good question, and one that can be answered very easily, but it can also get complicated.
How’s that for speaking like a politician:)
The question is:
Do I really need credit and a good credit score?
The answer is:
Technically no, as long as you never need a loan, which means paying cash for most things….well…everything.
That means paying cash, or using a bank card, for any purchases you may make, of any cost or size.
You will need to pay cash for furniture, white goods, a car, a house, everything.
Remember, large purchases that we cannot save up for, will require a loan. And loans mean an extension of credit, which means having a credit score.
As I stated, you really do not need credit as long as you can pay for all your purchases.
However, all may not be as it seems.
So let’s just say you don’t need to borrow money, ever, and you have never borrowed money, or had a loan.
Odds are you may not have a credit history, which means you may have a low credit score. Just by not having ever had credit does not mean you would have a low credit score. Usually low credit scores are associated with someone in debt, who pay bills and accounts late, and in general has bad credit.
But having no credit does not give the scoring models for credit scoring anything to go on:
* You have no payment history
* You do not owe any money
* You do not apply for credit
* You have no accounts
So there is no basis to create a good or high credit score.
But what do you care? You don’t need credit or a credit score.
Wrong, sometimes you do need a credit score.
Credit scores are used in other aspects and parts of our lives, besides the granting of credit/loans.
Jobs: There are some jobs, and some employers that use credit checks as a part of the hiring process.
Having no credit or no credit file, may seem OK, as there is nothing negative showing, but this also fails to show important things about you.
Paying cash and saving for everything shows something about you as well, you are good with money. However, an employer cannot see or view that, they can only view your credit file.
Insurances: Some insurers use credit scores and credit history as a part of the underwriting process to issue insurance policies, and also in determining premiums.
Having no credit history may be detrimental in getting a policy issued, or more costly in the end due to higher premiums.
So do you really need credit, maybe not, but there can be areas of our lives impacted by not having a credit history and credit score, and these are outside borrowing money and getting a loan.