D-E-B-T has become a “dirty word.” Of course, in a huge amount of cases, that makes sense. When it spirals out of control and becomes too overwhelming to pay off, debt is a bad thing. It can ruin people’s lives, and it can be used by some to extort unfair amounts of money out of vulnerable people.
However, debt, in itself, is not a bad word. To be indebted to somebody simply means they’ve done you a good turn, and you now owe them one good deed in return. It’s a pretty basic concept which stretches back to the dawn of humanity, so it baffles me that so many are terrified by the word ‘debt’. It only becomes a problem if you keep asking for favor after favor, without ever having the intention or the means of repaying these favors.
If you’re smart, however, then a debt can great a good reputation for you. If you have a credit score next to your name which proves you’ve taken out loans in the past and paid them off quickly and easily, this says something about your reliability and trustworthiness. It says that you’re financially secure, so if you do ever need to take out a debt, lenders don’t have to worry about whether you’ll be able to pay it back or not.
So, if you’ve never taken out a loan before, you have no credit history and, therefore, no record by your name to prove how trustworthy you may or may not be. That means you might not get accepted for loans so easily. How do you get out of this hole, then?
If you want a house, you’ll probably need to pay rent or take out a mortgage.
Unless you’re rich, in which case this article really isn’t for you. You’ll never need a loan. However, for the majority of people, there comes a point where certain big necessities in life, such as owning a home, are a little out of the price budget. When that happens, you need to purchase such things through gradual payments.
How do you think renting houses works? Well, in a lot of cases, you need a good credit history. Think about it; mutual trust is needed. You want to trust the agency offering the house, but they want to trust that you can pay them back each month. They can’t trust you if you have no record proving that you’ve invested in anything like that before, or taken out any sort of loan and paid it back in due time.
Of course, that’s easier said than done. So, if you’re wondering how to establish credit and finally get a good name for yourself, whether it’s because you need a loan or even just a good deal on a credit card, it might be time to conduct a little research. It’s not too late to put things straight now and start building up a good credit history.
It also opens up opportunities in the workplace.
You might have already known that taking out a loan to buy a car or a house required a good credit score, but maybe that didn’t bother you. However, what you may not have realized is that you’ve probably missed out on good job opportunities through a lack of any sort of credit score. Maybe you’re happy with your current career path, but you could be opening up more doors if you had some sort of credit to your name.
In some cases, no credit might even look worse than a low credit score, because you could be anybody. At least in cases where you might have made a few slow payments on a loan, employers can give you the benefit of the doubt. Bad credit isn’t a death sentence, but it can be hard for some companies to work around no credit history at all.