[Y]ou pay everything with cash. Your motto is “If I can’t pay cash, I can’t afford it.” That means no credit ever. You may assume that you don’t need to worry about your credit score if you don’t plan to use credit to buy anything. Unfortunately, credit isn’t just about loans and credit cards. A credit rating impacts everyone at some point in their lives.
1. You Need Credit to Get Car Insurance
Even if you pay cash for your car, you may need credit to get car insurance that is affordable. Many states allow insurance companies to review an applicant’s credit history to set the rates for them. A person with no credit history or a bad one may pay more for car insurance. In some cases, you may even be turned down.
2. You Need a Place to Live
Many landlords now ask to do a credit check before they approve an application. They want to know that a person won’t leave them with a big rental bill. You may also have a credit check to get utilities in your name. Some utility companies charge a deposit for someone with poor credit or none. This can amount to several hundred dollars, depending on what you need.
3. You Need a Job
Some employers check credit history when you apply for a job. While a lack of credit history may not keep you from getting a job, poor credit might. This becomes a bigger deal if you will be handling money or if you have access to financial accounts.
There are many other reasons you may need credit such as renting a car or other traveling expenses. Credit is used as a way to measure a person’s level of responsibility. A lack of credit can cause you almost as much harm or delay as having bad credit.
It’s also important to understand that having credit doesn’t mean you pay for things on credit. It can simply mean you have that option and that you have proven to be responsible when it comes to money.
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