by Christy Bieber | March 22, 2020
Are you one of them? Here's what to do if you are.
The majority of Americans care a lot about their credit score -- but there's still a sizable number who don't. In fact, new research from Experian shows just 72% of people think that their credit score is important. That means close to one-third of Americans don't believe this number matters as much as it does.
There are lots of reasons why you might not believe your credit score is important. You may not plan to borrow money in the future, for example, or you may not be aware of all of the different ways your score could affect you.
The reality is, even if your goal is to stay debt free forever, you still need to pay attention to your credit score.
Earning a good credit score isn't just important so you can qualify for credit cards or personal loans. It matters when you get a mortgage or car loan too -- and many people can't afford to pay for a car or home with cash. While there are some mortgage lenders who offer alternative underwriting and look at other financial factors, you'll be limiting your borrowing choices.
If you want to go back to school or help your child to afford college and you can't pay cash, your credit score could also affect your ability to get student loans. While federal student loans don't require good credit, private loans do -- and many students end up relying on them after they've hit their federal loan limits.
Even if you're 100% committed to debt freedom and not taking out loans, you never know if your situation will change and you'll need to borrow in the future. And, you may change your mind about your decision if you want to step up your retirement savings or start making other investments. Since mortgages and student loans typically charge a lower rate than you could reasonably expect to earn by investing in the stock market, you may decide that paying cash for a home or college tuition isn't actually the best use of your money.
Not convinced because you know in your bones you'll never borrow? Your credit score still matters because it affects other financial transactions you may want to enter into.
Landlords almost always require good credit to rent a place. Even if you own your home now, you may want to rent when you relocate or as you get older. You don't want the absence of a credit history or a poor credit score to hold you back.
If you want a cell phone on a contract, your credit is going to be checked too. Or if you hope to sign up for internet service or cable TV on a contract. Even getting connected to utilities such as gas, water, and electricity often requires a credit check. If your score is low or you have no credit score, you may have to jump through additional hoops such as paying a larger deposit.
Your auto insurance might be more expensive too, as credit is one of the factors insurers take into account when determining how to price your premiums.
Since there are so many reasons your credit score matters, it's worth making the effort to earn a good score. You can do this by being responsible with how you borrow -- and you can do this even if you want to stay debt free.
Start by opening a credit card (you can get a secured card if you need to). Then, set up a small recurring charge on it, such as your cell phone bill or a streaming subscription service. If there's a predictable small recurring charge on your card each month, you can set up autopay to easily and effortlessly develop a positive payment history. Over time, this action alone should help you build your score.
Ideally, you'll want a mix of different kinds of credit. But if you're hoping to stay debt free, this approach should at least enable you to earn a reasonably good credit score over time. There's no reason to be held back by having a poor credit score, or not having one at all.
If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest for a whopping 18 months! That’s one reason our experts rate this card as a top pick to help get control of your debt. It’ll allow you to pay 0% interest on both balance transfers and new purchases until 2022, and you’ll pay no annual fee. Read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.