Why Is It Important to Build Credit History?
It may be very hard to build credit if consumers do not already have credit. Lenders have a hard time deciding if consumers are a credit risk or responsible consumers. The majority of the population must depend on credit in order to obtain the things that they want in life. Building credit is one the most important decisions that consumers can make in their lives. Many people argue that it is not a good idea to get credit, but consumers should for many reasons.
Why Build Credit
- Consumers should build credit to establish creditworthiness. Lenders usually see those without established credit as a credit risk. Risky consumers are a greater risk for default so lenders are very hesitant about extending credit. Those who build credit may qualify for a number of preapproved lines of credit since lenders check their credit to determine if the consumers meet their requirements.
- Build credit to raise credit scores. Lenders look for the consumers with the highest credit scores to offer credit. The higher the credit score, the more likely lenders are to offer credit. Paying bills on time and applying for credit help to raise credit scores. Those who do not have established credit do not have the wonderful opportunity to receive credit from some lenders. Without any credit activity, consumers will not see an increase in their credit scores until they do.
- Build credit to receive the best interest rates. The consumers who receive zero percent interest or a low interest rate have proven their creditworthiness to lenders. Not only do these consumers have high credit scores, but they also have a great deal of established credit on their credit reports. Even though a consumer may not have ever received any credit, lenders see them as a risk for default.
- Building credit comes in handy for big purchases. When consumers want to purchase homes, automobiles, or boats, they may need to have some established credit in order for lenders to consider their application. Some lenders may offer credit but others may not. If consumers want to have the dream of owning a home or vehicle, they must build credit before making these big purchases.
Ways to Build Credit
- Apply for a gas card. This credit card is probably the easiest one to obtain. The lenders are more likely to offer credit to those who have not yet established credit. Consumers usually receive certain benefits with the credit card.
- Use a co-signer for credit. Lenders may consider the good credit of the co-signer to offer someone with no established credit a line of credit. Choosing this option may offer future opportunities for consumers to receive their own credit card.
- Apply for a store charge card. Consumers should find a store that they frequent to receive a credit card. Lenders are more likely to offer credit to those who do not have established credit.
Receiving credit is not as easy as some may think. Without any established credit, lenders may overlook consumers for many of their lines of credit. Always remember to use credit responsibly because once lenders have bad credit, no one will likely lend them credit. Keep reading for more tips to easy credit.