5 Reasons to Keep Good Credit

Selasa, 17 Desember 2013

By Jackson H 

Some people wonder if they REALLY need to keep good credit. Many financial experts will tell you that credit doesn't matter if you plan to be out of debt because you won't be borrowing money going forward so what does your credit matter?
While I agree that once debt free you may not need to borrow money right away, I disagree with the notion that you shouldn't try to at least keep reasonable credit for emergencies when you absolutely might need to borrow money. Even more, many times good credit is needed for more than just "borrowing" money. Here are a 5 reasons why you need to keep good credit, even if you are debt free.
1. Buying a House - Someday, especially if you are young, you will want to buy a place of your own and that will require some high standards when it comes to credit and your credit score. Most lenders require a minimum credit score of 680 to qualify for a fixed rate mortgage rate. You always want to shoot for a fixed rate as it limits your monthly payment to a fixed amount, so there are no surprises down the road.
2. Financing a Car - Similar to buying a house, you will need a good credit score to finance the purchase of your next vehicle. Most banks and even car dealers will offer you a better rate if your credit score is higher. And obviously, we all want the lowest rate when borrowing money. My suggestion for financing any type of highly depreciating asset like a car is to borrow only up to 60%-70% on the car's loan value. This provides you with an equity safety net which will help you get a jump start on paying the loan off before the value of the car can drop too much.
3. Getting a Job - Like it or not, many employers have begun to run credit checks on their candidates. In fact, 47% of employers admitted to running your credit when you apply for a job. After all, if you're being hired to work for someone, they want to know how responsible you are with your own money. This is a good indicator to your employer about habits including: can you manage your responsibilities, are you timely and are you an integrity laden person.
4. Starting a Business - Every year, thousands of Americans decide to start their own businesses. Getting a business up and running isn't always easy however and usually takes some significant funding to get going and stay afloat. Depending on the type of business you want to start, you may need to have your local community bank help you make your dreams a reality and succeed. Even if you plan to borrow money in your business' name, most banks require a credit check and evaluation of the partners of the business. Because after all, you are the one who will be making the decisions.
5. Emergencies! - Dave Ramsey always says that many times in life, "Murphy shows up at your door and wants to stay awhile." He is referring to the concept of Murphy's Law. The infamous statement that, "If something can go wrong, it will go wrong."
We all find ourselves in this situation at some point in our lives when things just seem to happen for the worst. Your car breaks down two weeks from payday, your furnace goes out in the middle of winter, or most horrible, you lose your job. Now what? Our philosophy for all our readers is that we encourage living debt free as much as possible, but sometimes you just have to borrow some money to make things work.