I was reading some of the challenges faced by an individual who chooses to avoid credit, and pays cash for all her purchases. While she knowingly does this from choice, one episode was particularly interesting:
I have no usable credit history by choice. I have money. I pay my bills every month on the day they're available online. I don't wait for the email. I have never had an overdue bill, not with my landline (20 years), cable TV/internet (15 years), rent (25 years), or anything else. All that "history" is verifiable, but irrelevant in a credit check.I understood that irrelevancy when I went in to a London Drugs store last year to go from prepaid to postpaid cellphone. I was prepared to pay a large security deposit. I was not prepared for the reaction of the sales rep when the $700.00 deposit popped up on her computer screen. She looked at me horrified, grabbed the phone off the counter and clutched it to her chest. I left the store almost in tears of humiliation, and without the phone I could very well afford. I had no heart to try another store.
I have spoken with a number of young folks who are averse to owning a credit card due to the horror stories they have heard about friends or others who have fallen into the trap of misuse of credit. However, I believe it is important for each of us to work to have an impeccable Credit Rating, even if we prefer to live a cash lifestyle.
One simple way to build a quality credit score is to have a credit card you use to purchase items you would have had to buy anyway, putting the money aside, and paying it off when due. By setting it up so you purchase groceries, or car repairs, or similar, especially when you have the cash in hand to make the payment, you build credit. Another simple way is, once you have saved for a home appliance, to purchase it with a loan. You may have an interest cost, but, should you need a loan in the future, you will have a credit history to your benefit.
The importance of having a quality credit rating should not be dismissed as out of hand. It can literally mean the difference to having a roof over your head! We moved to a new town some years ago with an insanely low rental vacancy rate. We both had professional credentials, and I had a solid job which I had started. We had a limited down payment, but had built a good credit rating. This gave us the opportunity to purchase a house, where no rentals were available, and settle in to our jobs. Without a credit rating, and therefore the house, we could not have stayed.