Credit comes with pitfalls. If you don’t know that by now, you must live in a cave. Is there every a good reason to enter into a credit agreement?
Honestly, with the availability of debit cards and their acceptance just about any place you would want to spend money, makes credit cards completely unnecessary. There are even perks available with debit cards now including cash back and reward points.
To me, there are very few instances where entering into debt is an okay decision. Two of these come to mind:
- A home mortgage
- A business loan
Now, you may be hit with an emergency that forces you to go into debt. I’ve been there, done that. But better than going into debt is to plan for those inevitable emergencies by saving money in a “rainy day” account so that when they do come along, you have the money to pay cash instead of going into debt.
Most of us are not going to save aside the amount needed to pay cash for a home, and will take out a loan instead. This is definitely a case where having a good credit rating will help you.
If you have good credit, you will qualify for the lowest possible interest rate. If you have no credit, you will probably pay higher interest. If you have bad credit, you will pay for your home three or more times over the life of the mortgage.
If you currently have credit accounts, make sure you make your payments on time every month. Always pay more than the minimum amount due. If you have a lot of credit cards, and it will be a while before you apply for a loan, cancel some of them. It isn’t just how much you owe that’s taken into consideration, but how much credit you have available. The last thing your mortgage company wants is for you to immediately go out and buy new furniture and remodel you house on credit and max out your cards!
If you are diligent with your debt payments and monthly bills (utilities, etc.) you will be in the drivers seat and your credit rating will be solid — meaning better terms for you when you go to buy your dream house.