If you plan to take out loans for school, buy a home, open a credit card – just about anything that requires borrowing money – having good credit is vital. A long, positive credit history makes you an attractive borrower and can open the doors to more financial opportunities in life. Read more to learn why you need credit in the first place.

4 Reasons to Care About Credit

Whether you’re new to the credit game and haven’t built a history yet, or have made a few mistakes in the past and need to improve your credit, here are four major reasons why you should get started today.

1. Paying for College

Perhaps you’re pursuing higher education right now. Maybe you have children you someday hope to send to college. Considering that the cost of college is rising faster than inflation, it’s unlikely you will be able to foot the entire bill.

In 2016, the average U.S. household carried $49,905 in student loan debt;1 having good credit will ensure you qualify for student loans with the lowest interest rates and favorable terms, making it much easier to pay them back on time.

2. Buying a Home

For many, home ownership is the cornerstone of the American Dream. Unfortunately, those without good credit won’t qualify to turn that dream into reality.

The best mortgage interest rates and most affordable loan terms are reserved for borrowers with excellent credit scores of 720 and up. Although some FHA mortgage programs approve borrowers with credit scores as low as 580, anything under 630 – which is considered “poor” credit – will make obtaining traditional home financing very difficult, if not impossible.2

Even if you have no plans to buy a house, though, credit is still essential for finding a place to live. Many landlords require good credit in order to rent, and utility companies will often charge a security deposit to open an account with poor credit.

3. Finding a Job

Many job seekers don’t realize their credit can impact their chances of landing a new job. Employers are not privy to job candidates’ credit scores, but depending on the state, might be able to request a modified credit report from the credit bureaus.3

Though the practice is controversial, it is possible to be denied a job due to negative entries within your credit reports.

4. Owning a Credit Card

One of the biggest reasons to establish good credit is so that you can take advantage of all the benefits credit cards have to offer. When used responsibly, credit cards can help you spread out the cost of big ticket purchases and manage monthly expenditures more easily. Not to mention, you need a credit card to perform many common transactions, such as online shopping, booking a hotel and more.

In fact, some credit cards even offer rewards on spending, such as cash back or points that can be redeemed for things like gift cards, airline miles and hotel stays.

Even better, credit cards protect your cash and bank accounts from loss or theft. Credit card purchases are protected under the Truth in Lending Act; in the case of fraudulent charges, the most you can be held liable for is $50.4

How to Build Credit

So now you know why you need good credit. The next step is ensuring you have it. There are two major ways to establish credit if you have poor credit or no credit history at all and you maintain a good to great credit score:

  • Open a secured card: One of your first steps should be applying for a secured card. These cards are credit cards, except that you provide a security deposit up front to secure the line of credit. By regularly using a secured card, making timely monthly payments and practicing good credit management, you can build your credit up over time and you may even qualify to get your deposit back.5
  • If you’re a student: Students have several options available to help them build credit early, including student credit cards, which offer protection and perks such as rewards on spending. If you’re in school, take advantage of your student status and leverage tools designed specifically for you.

Establishing credit takes time and patience, but it’s worth the effort. Don’t miss out on the opportunities available to consumers with good credit – begin building yours today.


Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.