The downside of never having credit
The downside of never having credit will cost you financially. Most people are interested in having good credit. I feel you should work towards having the best credit history possible and the highest credit score possible. Furthermore, no credit does not equal good credit. Some people feel if they don’t have credit then their credit score will be high. This is incorrect and will cost you greatly if you follow this way of thinking.
I don‘t want debt
Debt has become a word that is combined with credit which is incorrect. Credit is leverage debt is something you owe and pay back with interest (usually). Understanding the difference between the two can change your life.
The extremely wealthy don‘t need credit
Extremely wealthy individuals don’t need credit. However, they use credit to build more wealth. The extremely wealthy can afford to buy a multi million dollar home cash but most don’t. With historically low rates and historically high market valuations the wealthy want their money working for them and they are comfortable borrowing on the cheap.
The extremely wealthy can pay cash for college at Harvard and will never need to borrow (debt) ever for higher education. However, if your family is not able to buy your first luxury vehicle at 18 cash or purchase a luxury condo for you while you study, at some point in your life you will need credit.
Why do people run away from debt/credit?
From early on we are told debt is bad. And the truth is debt can be bad. Bad debt can destroy families and even bankrupt businesses. We are told to stay away from all debt and we are never explained the difference of leverage and having access to credit.
The downside of never having credit will for you to pay with cash for everything. By cash I don’t mean the green bills your nanna would give you on your birthday. Cash comes out of your debit card when you make a purchase. Those funds leave your checking or savings account. Using cash your financial institution will not reward you.
Using credit to your advantage
Ever rent a car at the airport? Ever leave a deposit when you check into a hotel? You can usually do that with a debit card but most car rental companies require a credit card or a large cash deposit. A large cash deposit you will not receive until your journey is over. Most times you receive those funds without any inconvenience. However, sometimes the return of your cash can be delayed.
At Budget Build Buy we know debt can be bad but credit can open doors to building wealth. I go back to the beginning for wealthy families. Credit is less important but it is still very important to them. For the most part the more you have the less you usually have to pay. Financial institutions are actively offering their wealthiest clients the best deals possible.
You need credit but it comes with potential for bad debt
Credit is the gateway to building wealth in America. The greatest generation built generational wealth when they returned from WW2 with government subsidized home loans. The generation which followed continued in the footsteps of their parents. They were able to attend college and buy homes and continue the cycle of building wealth. Granted many were left behind. However, without access to credit wealth in this country would never have been created.
Your first home will usually come with a mortgage (debt). A financial institution will only lend to qualified clients after analyzing not only your income but your credit history. The process is similar when purchasing a car. Unless you have the cash you will likely obtain financing for a car and based on your credit history your interest rate could be close to zero or double digits. Good credit will help you receive the best rate possible. A low interest rate will help you save money over the life of the loan and allow you to pay off your debt sooner and build wealth faster.
The downside of never having credit with limit your ability to borrow for a home mortgage. Most of us will never purchase a home and start building equity in our homes without a mortgage. Renting helps pay down the debt of homeowners (landlords) and it helps build equity for the homeowner. At one point I became frustrated with building wealth for others. Are you tired of building wealth for others? Are you ready to build wealth for yourself and for your family?
Owning a home is one of the first steps in building wealth. When your equity is greater than your liabilities your net worth is positive. As you build more wealth your net worth increases.
The downside of never having credit
When I hear of experts discussing why credit and debt is bad I think of the single working mother with no credit and no car. For her to get to work she needs to take 2-3 buses and it takes her almost 2 hours each way. Having a vehicle will save her time and money. But she was never taught to build credit. She was taught credit/debt was bad. If you know someone like that please connect them with Budget Build Buy.
Don’t fear credit or debt. Understand all of the details before taking on new credit. Leverage the Budget Build Buy resources to learn more about building and maintaining a high credit score and a clean credit history.
The downside of never having credit will stop you and your family from building wealth.
