One of the trends taking place right now is a desire to move away from using credit. Another point of interest is the idea that you can get by without a good credit history. After all, if you aren’t applying for a loan, do you really need to worry about what’s in your credit report? Many think that if they already have a home and a car, the credit report doesn’t matter anymore. While it would be nice if this were true, this isn’t always the case.
Your Credit History is About More than Borrowing
In the past, your credit report was mainly used as a way for lenders to determine how risky it would be to loan you money. Now, though, there are a number of people who use a credit history to judge your general level of financial responsibility, even if borrowing isn’t involved. Here are a few of the people who might look at your credit report:
- Service Providers: Cable (and satellite) providers, as well as cell phone providers, might decide to check your credit before agreeing to provide you with services. If your payment history looks spotty, or if you have a poor credit score, a service provider might be reluctant to deal with you, since you might be late paying.
- Insurance Companies: Your credit history might be used as part of the criteria to determine your insurance premium. If your credit history is negative, you may have to pay a higher premium. This is because many insurance companies believe that your fiscal responsibility, as shown in your credit report, translates into responsibility in other areas of life. If you have a good score, you are likely to benefit by saving money on your premium.
- Employers: While a potential employer is unlikely to look at your credit score, he or she could look at your credit report (with your permission). This is especially true if you are applying for a position of some sensitivity, such as a security guard or someone with access to proprietary information. Employers might decide that negative credit items could make you vulnerable to bribes, embezzlement or other problems.
While we may not think that it is right for a credit history to be so important in finances, the fact of the matter is that many people use your credit history. Indeed, there are some who would judge what kind of person you are by what is in your credit report. Whether that is right or wrong may be a subject for debate, but the fact remains that you are likely to be evaluated based on what is in your credit history — for a non-credit reason — at some point. That means that you still need to think about building and maintaining a good credit history, even if you have no intention of applying for a loan anytime soon.
Miranda Marquit is a professional blogger. She specializes in writing about personal finance for a variety of blogs, including FinancialHighway and Credit Score Blog.