How No Credit Can Hurt You

By: Mike Clover
What is all the fuss about paying cash for everything? Isn't that a good thing? If you pay cash for everything doesn't that mean you don't owe anybody? Quite contrary to popular belief this actually hurts you. Let's assume you pay cash for everything and all the sudden need a loan, it will be hard to get a loan with no credit. You will have not any credit scores generated with the credit bureaus with no credit being extending to you. I have heard quite often that I pay cash for everything because credit cards scare me. But let's face it, we are all adults and can do anything we put our mind to. In our current society banks now use a automated software created by My FICO that determines your credit score and risk. If you have never borrowed money or applied for credit this software has not generated any credit history or credit scores for you. This is exactly what the banks currently look for.

Applying for Credit
Let's assume you decide to go and apply for credit, only to find you are getting denied because you don't have any credit.

There is a solution to this that is quite simple. You get a secured credit card. A secured credit card is cards where you deposit your own money usually up to $300 dollars into an account of the banks choice. Once this money is deposited about 30 days later the credit card company will report this history to the credit bureaus. This is the first step in establishing credit scores and credit history. I recommend getting two cards to have two lines of credit history reporting. Remember to pay everything on-time so you don't have any late payments. This is very important. Also these secured credit cards usually charge fees to get started, during the beginning of this process you will have a balanced owed even though you have not charged anything. Make sure you pay these fees. The secured credit card we recommend is the Orchard Bank card. This card has low fees and is great for establishing good credit when you have no credit.

Now that you have put your cash only days behind you, you can join the rest of America in the world of credit. Your credit is so important these days that you can't afford to live a cash only life. Employers, utility companies, and insurance companies and just about everyone is pulling credit to see if you are responsible or not. So there is a good chance you were paying higher fees because of your lack of credit. As you move on long with the credit building process make sure you pull your credit regularly. Pulling your own credit report does not affect your credit score. Pulling your credit report regularly is good credit management.

Credit Matters
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