If you aren’t planning to borrow, it seems like it might be pointless to worry about building up your credit profile. After all, if you don’t have a credit score, it doesn’t matter if you aren’t going to get a loan, right?
The unfortunate truth is that this isn’t always the case. In fact, there are many situations in which your credit score matters more than you think. Even though you might not think it’s fair, having no credit score says something about you to financial service providers and others. The lack of a credit score is an indication to others that they can’t trust your ability to be responsible with your finances.
Financial Setbacks Due to a Lack of Credit Score
Not having a credit score can actually cost you money. A landlord can charge you a higher security deposit on a rental if you don’t have good credit (and having no credit is often seen as just as bad as — or worse than — a poor credit score). You might also find yourself with less than ideal terms when it comes to signing up for a cell phone plan or getting Internet service.
Additionally, in some states, it’s legal for insurers to check your credit score when determining your premiums. If you don’t have a credit score, you could easily end up paying between $20 and $50 more per month on your insurance premiums.
When you think about the extra costs of not having a credit score, and how they can add up over time, it becomes clear that you could easily be missing out.
When You Decide to Buy a House
The biggest issue you run into, though, is when you decide to make a major purchase that practically requires that you borrow. You might decide to never get a credit card, or even to pay for your cars with cash. But if you make buying a home a priority, having no credit score means you will have a very hard time qualifying for a mortgage.
No one wants to loan hundreds of thousands of dollars to an unknown entity with no history of making loan payments (and credit cards count as loans). While you might find some lenders willing to take a chance on you, you will likely have to pay a subprime rate to make it happen.
You don’t have to go into debt to build your credit history. If you get a credit card, use it, and then pay it off every single month, you can get a good credit score without the accompanying debt. You’ll be able to further your finances, and get a house when you’re ready.
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