Why No Credit is Bad Credit

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Growing up as a first generation American with Latin born parents, I didn't know what credit was until I got to college. My parents did not rely on credit and paid for everything they purchased in cash. They grew up in South America, where the knowledge of credit was limited and people were wary of credit cards. I remember my parents telling me that credit cards had high interest rates, high annual fees and only wealthy people were suitable to apply. They believed that no credit was good credit -- so that was all I knew.

As I entered adulthood, I began to notice the importance of having credit when I applied for college and needed a student loan. Since my parents had no credit at all, I had to apply for student loans on my own! I was worried that I wouldn’t be able to afford college. Fortunately, I was approved for the loan and completed my education.

That experience alone opened my eyes to what credit really means and the importance of maintaining good credit. Your credit score is a number between 300 and 850 that is determined by several factors like a history of paying off debt on time and the amount of debt you hold relative to your available credit. This number affects almost every major investment you will make in life (from buying a home to determining your interest rate when applying for a credit card). Maintaining a good credit score is a responsibility. If you have a credit card, be sure to pay your bill on time. Late payments can lower your score and have a significant negative impact over time. Look for a bank that offers online banking and bill-pay to help you never miss a payment. 

A recent TD Bank survey found that 71 percent of those intending to buy a home planned on paying for theirhome with a mortgage. Good credit is a key component in the home buying process as it shows reliability to your lender and may affect your interest rate. If you’re preparing to buy a home, making on-time rental payments will help you build the positive credit history you need to qualify for a mortgage.

Nevertheless, my parents’ upbringing of paying in cash and not to buy things that we couldn’t afford is still embedded in my head and not necessarily all negative. These lessons taught me to save money, spend wisely, and maintain good credit. As a result, I qualified for a mortgage and was able to purchase my own home.  

Roxanne Vivanco is a Community Development Loan Officer at TD Bank.

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