What are the disadvantages of having no credit... - Limited/Bad/Fair Credit Questions


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Credit Card Applications » Questions » User Questions » Limited/Bad/Fair Credit » What are the disadvantages of having no credit history?

What are the disadvantages of having no credit history?

Answered on | Updated on October 29th, 2010
The content is accurate at the time of publication and is subject to change.

Credit history is what defines the financial position of every individual. It is therefore, of utmost importance to have a good credit history. If having a credit card is not desirable, there are other ways of building a good credit history, since it is the first document that is referred to, in any financial deal.

Not having a credit card or a loan account is desired by many, since it does not give rise to situations like handling the debts. But it comes with lots of other disadvantages.

Every financial transaction from buying an automobile to buying a home requires a credit history. The loan companies, banks and even credit unions require references of credit history to approve loans or finalize purchases. If an automobile has to be purchased, an automobile loan is generally required in order to arrange finances. But the loan companies issue loans only on the basis of credit history, so buying an automobile becomes a problem.

Ironically, if a new credit card has to be obtained, the credit card unions too refer to the credit history to approve applications. This makes it difficult to obtain a credit card and therefore difficult to build a credit history. Applying for housing loans too, pose a similar problem, since the amount at stake is a large sum of money and will not get approved without well established credit history.

Purchasing world apart, not having a credit history can be a hindrance in day to day life too. Situations like renting an apartment or even applying for a phone line can be difficult without a credit history reference. Utility providers for electricity and cable too need a reference to credit history, since it establishes the credibility of an individual. Though there are ways to circumvent the credit history requirement, the processes are too longstanding, and the choices too limited. Some of the ways to overcome the requirement of a credit history is by using records like employment history, or recommendation letters by previous employers or tenants or even from individual money lenders. While these are not accepted in all circumstances, it can be used as an alternate while renting apartments or obtaining utilities like cable, phone and electricity.

It is always better to have a credit card and use it in a controlled fashion in order to build a credit history. Applying for a student credit card does not require a credit check in most of the cases. Cards can also be obtained by having a co-signer who has a valid credit history.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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