Don't Ignore Your Credit Score. Here's Why

If you follow some experts' advice to ignore your credit history or purposely avoid building one, you may be sorry.

Jan 26, 2014 at 1:00PM

You might go for years without needing a credit score or having any reason to even know what's in your credit history. Some people may never need a credit score.

In fact, some people are proud of not having scores or not worrying about them. They say credit scores are for losers, or at least for debtors, because they say you can't have one without being in debt.

Thirty years ago, that may have been the case. Nowadays, not having a good credit score can be a costly mistake. Here are three reasons to work on your credit score now.

1. You don't know when you need a credit score
Unless you're living off the grid somewhere, there's a good chance you'll need a credit score sometime -- possibly sooner than you think.

Credit scores are becoming a bigger part of our lives as they become easier to access, as more people use your score -- not a personal judgment or a gut feeling -- to decide whether to do business with you.

You'll need a credit score to buy a car, and possibly to rent an apartment or business office.

If you apply for certain types of jobs, be ready to show your credit score. In the past, employers wanted to be sure you weren't in financial hot water before they let you manage client cash or be in other positions of financial responsibility. Increasingly, employers may ask to see a credit report for any job.

Starting your own business? Your credit score can help decide whether you get a business loan.

For most people, the biggest reason they need a credit score is so they can buy a house. I've known people who didn't believe in mortgages, so they lived in trailers in the Mojave Desert. For most of us, that would be a long commute, and we wouldn't like the kitchen. Mortgages are a fact of life, and if we can't change the game, we'd better learn the rules.

Some people will always get a loan with a skimpy credit history or a less-than-optimal score. They'll almost certainly pay a higher interest rate, however. Over the long run, an insufficient or lousy credit history will cost you a lot of money.

2. It takes time to build a good score
When you decide you'd like to buy or refinance a house, it's a bit late to start working on your credit score.

You may be able to build a decent score from scratch in a year or two, but an excellent score can take longer. That's because a major portion of your score comes from the length of time you've had open accounts. Potential creditors aren't that impressed with a perfect payment history of a couple of months or so.

3. Building a score doesn't have to hurt your financial position
There's no truth to the idea that you can't build a credit score without carrying a balance on your credit cards. You don't need to use a card a lot, and you certainly don't need to buy anything you don't need. Put a tankful of gas on your card occasionally, pay the balance off before it's due, and you're on your way to an excellent score.

You can also bolster your credit history by asking other creditors, such as the phone company or your landlord, to report to the credit bureaus. This adds to your credit history without putting you in debt.

To build an outstanding score, you should have more than credit cards in your credit history. If you're buying a car anyway, you might pay it off quickly with a short-term loan. Don't buy a car, or a better car, just for your credit score's sake, however. If a move isn't good for your total financial picture, in the long run it won't be good for you -- or your credit score.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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