In many countries around the world, using "credit" or borrowing money is often perceived negatively. The belief that borrowing money is dishonorable and a lack of trust in financial institutions, especially in countries with less established financial systems, are two of the most common reasons why individuals quit to use credit.
If you are an immigrant living in the United States, sometimes you too prefer not to borrow money. However, living in the United States, it is essential to borrow money in order to build your credit history – a report card on how you manage your money.
Without a credit history it may be difficult for you to:
- buy a car or a house
- start your own business
- rent an apartment.
In the United States your credit history is important for much more than qualifying for a loan.
- Landlords check credit histories. Without a credit history, you might have to pay a higher deposit to move into an apartment and in some cases you may not be able to rent at all.
- Without a credit history you will have to pay a higher deposit to get a cell phone.
- Additionally, insurance companies, mortgage lenders and some employers check credit records.
Some companies evaluate how well you manage your money to determine how well you manage other areas of your life. For instance, if you frequently make late payments on your loans, a potential employer might think that this could mean that you will be late in meeting important work deadlines. If you have declared bankruptcy in the last 10 years, your ability to responsibly manage money at work may be questioned.
If you are an immigrant you might fear that even if you try to build your credit, your credit history will be ignored. This is not true. Developing a credit history and establishing good credit takes time and requires patience and discipline, but in the end it pays.