Believe it or not, some people are old enough to legally have a drink but don’t have a credit card.
Some people will applaud them and say, “Good for you! It’s best if you never have them in the first place!” I totally disagree.
As I mentioned recently, my wife and I put an offer on a house this week. The first step in the process was getting pre-approved by a loan officer. This was a relatively painless experience for us (despite the in-your-face reminder of how many student loans we have). While there are a few different variables when it comes to getting pre-approved, credit score is one of the most important.
When it comes to credit, one consideration is how long your credit history is. That means, if you have had a credit card for ten years, you are better off than someone who has had one for only five (assuming you both pay it off in full each month).
There are other benefits to having a credit card that I won’t get into right now, but if you plan on buying a house anytime in the near future and you don’t have a credit card, you better apply for one. In fact, if you plan on buying a house EVER, you should consider getting one sooner rather than later. You are going to need that credit history to get pre-approved.
I was luckier than most because I got one right when I turned sixteen. I lived seventeen miles from high school and my parents paid for the gas for that commute so that we wouldn’t have that burden. They tracked these expenses by getting us a credit card. Sounds dangerous, but I never got my card taken away for using it for other purchases (my sister may or may not have gotten hers taken away… :P) Little did I know that credit card was going to give me an eight-year credit history when I turned twenty-four, more than most people my age.
Moral of the story? You are going to need credit history to get a house. Everyone I know plans on having a house some day. If you don’t have a card, plan on applying for one this weekend.
Weekend Reading
Had fun putting this together last Friday, so thought I would do it again. Here are some of the posts that I enjoyed this week:
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Peter at Bible Money Matters talks about what millionaires drive and explains how income level and car prestige don’t always match up.
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Em at My Journey to Millions is taking on a $1,000 challenge along with her other August goals.
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Jeremy at Modest Money shares some blogging tips in Effectively Using Keywords On Your Blog – Part 2 along with her other August goals.
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Greg at Club Thrifty discusses buying a house vs. renting.
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Making Sense of Cents is giving away over $650 worth of prizes for their 1-Year Blogiversary.
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The Other Guy at Average Joe’s Money Blog asks what happens when you fall behind on your mortgage?.
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I cannot imagine not having a credit card. I love the convenience and of course- the rewards! My favorites are my Chase Freedom card and my Chase Sapphire Preferred card.
Thanks for the mention! Have a great day!
@Holly at ClubThrifty The rewards are a big bonus! It’s the reason I use mine whenever I can. I use Discover cashback and love it.
“My sister may or may not have….” way to only throw her 1/2 way under the bus! ;-) Thanks for linking to our little site! Have a great weekend.
@AverageJoeMoney Haha I didn’t say she got it taken away! But she might have ;)
thanks for the mention! I’ve had a credit card since I was 17 and never abused it so my credit its phenomenal. Surprisingly, in some cases you don’t need a credit card to get a house. My husband has never had a credit card and has gotten a mortgage on 2 houses without needing one. He did pay off his first car shortly before getting the first mortgage so he had a credit history from making car payment for years. But how he got the car loan I don’t know. In most cases, you need a credit card.
@Em23 Yep there are definitely other ways, but it’s so much easier (in my opinion) if you are a young adult to just get a card as soon as you can.
Great point about the importance of credit cards. Young people just need to be knowledgeable about the effect of interest. Then they can start building credit and healthy credit habits early.
Thanks for the mention DC. So when are you ditching livefyre? ;)
@Modest Money Absolutely, I am thinking in terms of substituting always using a debit card to using a credit card for some of those purchases. I know some people who ALWAYS use a debit card.
I agree with @Modest Money . They are solid points. Buliding good credit has nothing to do with getting yourself into debt that you can’t pay off. Your credit report/score is like your report card in the credit-lending world.
@OrnellaGrosz Definitely agree. I suppose I am more targeting responsible people who are oblivious to how credit works : ) Did I really just use “oblivious” and “responsible” in the same sentence?
I definitely got a credit card when I turned 18. My limit was a whole $500 but it got increased every year and is the oldest piece of credit on my history despite the astronomical interest rate they have. It’s OK though b/c I pay it off in full the few times I use it to keep it active.
@Money Life and More Nice, yeah $500 is fine to start with…I just feel bad for people who finally decide when they are 25 they are going to get a credit card and realize they have no credit history and therefore aren’t approved for much.