It would be ideal if we could all go through life without incurring any debt, but that’s almost impossible. Paying cash for everything in order to avoid going into debt may be a smart strategy for staying out of trouble, but how can you build up a credit history doing that?
When you live your life paying cash for everything, there is no way you can build up a good credit score, which means you will run into trouble accessing some crucial financial services. When you have a high credit score you have an easier time qualifying for vehicle financing or when it comes time to buy a house and you try qualifying for a home loan.
If you have no real credit history or credit score, you have no choice but to pay cash for a car and for a home. You may be able to buy an inexpensive used car with cash, but it would be nearly impossible for the average South African to save up enough money to pay cash for a house. In order to lease an apartment you usually need a credit score. According to the NCA, rental agencies and landlords must do a credit check on any applicant before entering into a lease agreement.
Building up Good Credit
It can take quite some time to build up a good credit score. It also takes discipline because you have to pay your bills on time every month. The first step in building up a credit history would be to get a copy of your credit report from the various credit bureaus. The factors that affect your credit score are how frequently you move residences, how long you’ve been at your current job, and whether you consistently pay your bills on time.
You can raise your credit score if you make sure to pay all your bills on time. It also helps to make extra payments beyond the minimum required. Make sure that all your bills and any accounts you pay are in your personal name. If your bills are registered in some other name, no matter how timely you pay them, it won’t have any affect on your credit score.
No credit at all or bad credit and loans do not go hand-in-hand, so this will add to your struggles. There are specific things in life that are going to necessitate you entering a credit agreement at some time or another. Banks and other financial institutions will turn down your loan application every time. When you go to buy a car, you may need financing. When you are raising a family and want to buy a home, you will certainly need a mortgage. Bad credit and loans do not usually go together in the world we’re living in today.
You should never use credit to purchase non-essential items. Buying things on credit isn’t always a bad thing, but you do have to be careful. When credit is use responsibly, it can enhance your life and that of your family’s. A good debt can be anything really, a home loan or maybe a personal loan. It is how you take care of that debt that determines whether it is a good or bad debt. Having a bad credit score is a lot worse than if you had no score at all. But either one will ensure that you live a limited life financially. Rather than living with no credit history or score at all, you should try to build up a good credit history and score at a steady pace by being responsible.