While browsing around the internet, I recently came across an article about credit. Basically, it was based on how to obtain a credit card and how to build credit. The comments surprised me because almost everyone said to forget credit cards and use cash. While this might be true, credit is needed for a number of things in today's world.
Even for those who do not want to use a credit card or anything related to credit, it is important understand that credit in our lives is a measuring tool. Many people may not realize that to obtain auto insurance, home insurance, health insurance and, in many cases, even employment, your credit will be checked. This can be unfortunate for some people especially taking into account the current economic problems everyone is facing. Some may even pay more due to poor credit scores and history.
For those who do not believe in or want a credit card to be build credit, there are other ways to obtain a credit standing. Landlord rental verifications, utility bills, telephone bills, cell phone bills, insurance bills, etc. can be used to obtain credit. These things must be paid on time for at least 12 months in order to be verified and accepted for good credit. When applying for a mortgage, an FHA (Federal Housing Administration) loan will accept these as alternative credit with a manual underwriting.
Let's not forget the inevitable student loan. Student loans do indeed appear on a credit report. In fact, anyone who does not pay a government student loan payment will not be able to get a loan. In today's world, that is a big blemish on a credit report. Student loans fall into the same category as owing the Internal Revenue Service. They must be paid. It's that simple.
Credit is obtainable in many different ways. Using a credit card responsibly is still the simplest way. Charging something on a credit card and paying it off right away will still produce a credit history. Having too many credit cards with available credit will decrease an individual's credit score. The available credit is considered possible debt and in relation to income, this can create a problem.
The idea is to create a reasonable positive credit history which will, in effect, create a good credit score. Although it may not make sense, those with good credit scores enjoy the lowest interest rates on loans and lowest payments on other things available because they are a good risk for a company.