5 ways how You can benefit from your credit history
It is not a secret that a good credit score increases your capabilities and savings. Not everyone can easily open up a bank account, probably there are people who are anxious of credit score. But it is time to change your attitude, because you are losing your benefits. Consumer Financial Protection Bureau shows that in 2015, 26 million citizens were not able to benefit from their credit reports, because they did not have one. A slightly smaller percentage of people were not able to use their credit score – almost 19 million persons!
There are two reasons why it is happening: poor credit history and deficit of current credit activity.
Probably you are asking yourself: “what are the conditions to get a credit score?” For example if you want to get a FICO score (read also: Connection Between Credit Cards and FICO Score), you should prove that you are a real person, alive and healthy. The next step is harder. Your bank account should be six months old, or more. The last step: just state one of your accounts to the nearest credit bureau. You even can have a limit on your credit. Even zero credit is not a problem. Your bank or credit division can provide secured credit card. The credit-builder loan may work as well.
If you will keep abstain credit history it will put you in a quandary. As it was mentioned before you can benefit from your credit score: being a good catch for employers, to increase your savings, to cease to be a hostage of financial obligations.
Before you start searching a new apartment and leave your parents house, make sure you can prove to the landlord or agent that you are a legit tenant. The only way to do it, is to provide your credit history. This helps establish if the person will pay on time or not. You should be aware that landlords tend to not to deal with persons who cannot provide their credit report without any credit score. Of course, you can get a solution. Even with a perfect credit score, you should leave a deposit for a month. Without any credit history landlord can ask you deposit for more than one month, just to be sure that you are not going to leave apartment after first huge party.
Let’s assume that you somehow convinced landlord to move in. First thing that you should do is contact the household services. It will be a great bummer to know that utility services are asking for your credit papers. Once again you will pay a deposit. And it is not a huge problem if you are making 1$ million. But for others it is quite a distress. You can ask your parents to be your representatives in the case you cannot give a deposit. When you fail to pay your bills, your parents will be forced to pay it for you. It is not the best solution for someone who recently left home to experience independence.
Purchasing a dwelling
Your experience purchasing a dwelling can turn into disaster without your FICO credit score. First of all it will be a real quest to find a mortgage lender. Even if you will find one there is a great chance that with a poor credit history you are going to lose more money. You will spend more interest on mortgages than others.
For example with a high credit score (760-850 range) you can totally afford a mortgage. The myFICO.com webpage provides Loan Saving Calculator where you can count if a mortgage is affordable for you. Let’s assume that we have $300,000 loan. We are taking fixed-rate mortgage for 30-year. Every month expense would be $1,477. With annual 4.255 percentage rate, we would spend $231,611 on the interest over 30 years. And it is not the same story with a law range (620-639) credit score. With $300,000 loan, we are going to spend $1,768 per month. So with these numbers we are going to pay a difference in interest of $104,836. The total interest constitutes of $336,447. So you are going to pay more than your original loan, lose money and probably some nerves.
Make your education cheaper
We already know that life is not a fairytale and in order to rent a room or buy a house we need a good credit score. But do not think that in college you can relax and read your books. You should come to college prepared. It’s a fortune if you have a college loan and you are making reimbursement every month. That will help you obtain an impressive credit score, and you will be able to get more pleasant interest rate. That way you will get some savings for your books and probably coffee.
Institute for College Access & Success shows us that in 2016 the debt for students education was $20,000 to $36,350. The medium monthly reimbursement constituted $351 in 2015.
Why you need a Credit Card
There are a lot of people who do not want to get a credit card because they are afraid of bankruptcy. But it is totally safe until you are paying your bills on time and checking you balance regularly. Yes, you should be responsible.
In real life credit card can be very handy. For example the safest way to purchase something online – using a credit card. There is always a risk of losing all your money if someone have stolen your debit card. And it is not just shopping. You can rent a car during your vacation, rent an apartment for a few days, book hotel, use the card in the event of emergency. If we assume that you lost your debit card, and you are trying to get it back, it is nice to know that you are covered when it comes to pay all your bills in time, just to insure yourself.
The most pleasant thing about credit card: you will not lose your money if someone have stolen your card. A debit card losses in that case are ranging from zero to $500. And a credit card losses range from zero to $50. Some of the banks provide even zero liability in such cases.
Who can qualify for the first credit card:
Students. If you have any paper that is proving that you are still learning in college, you can apply for credit card. It is up to you to decide if you are mature enough to take these kind of responsibilities.
Secured credit card. As it was with landlords, in order to obtain something without credit history, you can leave a deposit just to show bank that you are a reliable person. Securing your card, paying your bills on time helps estimate your activity and build a credit score.
Authorized user. Ask your parents to help you with deposit. You can become an authorized user on parents credit card account. It is not like it was with your bills, they are not paying for you, unless you are going to take advantage of your own flesh and blood.
Find Your New Job
Of course your future employer is not interested in your credit score. The only thing that he is interested in – is your Credit History. That’s the only way to prove that you are a responsible adult. It is not so much fun to face the reality, especially when you are just graduated and searching for a good position. Without a credit score your credit report can look dubious. And this is not that you want to show to your potential employer.