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Is having no credit history a bad thing?

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Essentially, “credit” means “debt”, and in really pragmatic terms, debt is not a good thing to have. Our society however has been restructured in such a way that having no credit card (or not using it), and therefore having no credit history is a bad thing in some situations and poses several disadvantages.

One such disadvantage is the inconvenience of people doubting your identity. This is because lenders, employers, and creditors look at a person’s credit history and reports to verify if you are who you say you are. Moreover, these people review the person’s credit history and check the person’s past purchasing activities and transactions and base their decision of lending on how “good” or “bad” the credit history is. Lenders, for instance, will approve a certain amount of loan which corresponds to your credit history. Auto insurance companies, as well, charge high or low premiums based on the person’s credit history. So it is with other transactions.

If you do not have any credit history, these people would have nothing to base their decisions on, compounded with your lack of identity. You would therefore have a more difficult time with bank transactions such as loans and mortgages, and you would probably have to pay higher premiums than you feel you ought to. Or let’s say you are a businessman in need of a loan? Not having a credit history would take you ages to get the much needed loan. Countless people have experienced being easily granted loans simply because of their good credit history, while others with no credit history go through the inconvenience of convincing lenders that he or she is a responsible, financially mature individual.

Some people, though, try to remedy the “identity dilemma” by using a debit card and applying for cards for short-term periods only. This may be a legitimate strategy, but the key really is to own one or two credit cards responsibly and weather the temptation to apply for more credit cards than you really need.

Another disadvantage is tied to this – as absurd as it may sound (especially to first timers), your lack of credit history is an unfortunate proof of your lack of discipline and inadequacy in handling finances. Having a good credit history – meaning, bills paid on time, not going over credit limits, etc. are proofs of your financial maturity. Such a report will reflect to your advantage; people will easily believe your ability to handle finances.

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