[happy_guy]

Hi All.

I have always been debt-free with a decent job. I see people taking loans for all kinds of reasons: cars, houses, education, marriage, etc. ..

They say paying back loans on a regular basis adds positively to your credit history. Does it?

Please clarify that to me. Why would I have to take some loan (say, OSAP) and sincerely pay back on time in order to improve my credit history? Would I not be better off paying bills, earning money, investing a portion of it and letting it grow? Isn't that a better way of building your credit history?

I am uncomfortable with these two words: loan and debt.

__ happy_guy

 

[Mukhang pera]

Well, I think the answer lies in the term "credit" history.

The fact that you might be earning megabucks and piling away megabucks is not really something that gets reported to the credit reporting agencies. They track your history of repaying debt, not accumulating assets.

Not that you really have to have a "loan" to be advanced credit. At least not in the sense of taking out a mortgage or consumer loan. If you have a few credits cards and use them, paying them off faithfully, even if you never incur a dime in interest charges, is a matter that gets reported and helps build a credit history.

No doubt others here will expand upon this barebones explanation. I won't say more now, because before I can type more, a few more posts will intervene and render my post redundant.

 

[Userkare]

If you could go through your entire life without ever needing to borrow money, that would be great.

If, however, you should ever need to borrow money, say for a mortgage or other large purchase, then how would a potential lender know how much of a risk you were with no history of ever paying back a loan? You might be stuck in the same boat as dead-beats who are always late with payments and who need to be chased by credit collection agencies; i.e. be charged a very high interest.


Get a credit card or two, use it wisely, and always pay it off in full on time. You could even get cash back bonus for using it. Then, at least you would have established some kind of favourable credit history. I hate the notion of being in debt, but see the benefit of having a history of being trustworthy to lend money to.

 

[happy_guy]

Thanks all. Got it. Trust is the key. They need something that shows I pay back faithfully.

 

[twa2w]

Most banks have an algorythm for credit worthiness and credit score is only part of it. A few credit cards paid in full monthly can take care of that part. Job and residence history, stability play a role as well as net worth in relation to age and income.and a few other factors such as cash flow in account etc depending on bank.
Absolutely no credit history is a red flag depending on age. At 18 or 19 that is ok but at 35 it raises concern re fraud, fake identity, jail time etc.
So get thyself a credit card or two or an LOC. Use minimally and pay in full monthly as prev posters have suggested.

 

[Mortgage u/w]

Nowadays, cell phone bills are reported on credit bureaus. So if you have a cell phone and pay your bill on time, your credit history has most likely begun.

If you have a credit card, it will report as well. I would say that as long as you have it and even if you don't use it, your credit file will be fine.

Bottom line, don't omit to pay ANY bills because if they are handed to a collection agency, they will report it and tarnish your credit file. Believe it or not, the most common collection I see is Ambulance fees. For some reason, people like riding the ambulance without paying for it!

 

[treva84]

Nowadays, cell phone bills are reported on credit bureaus. So if you have a cell phone and pay your bill on time, your credit history has most likely begun.

If you have a credit card, it will report as well. I would say that as long as you have it and even if you don't use it, your credit file will be fine.

Bottom line, don't omit to pay ANY bills because if they are handed to a collection agency, they will report it and tarnish your credit file. Believe it or not, the most common collection I see is Ambulance fees. For some reason, people like riding the ambulance without paying for it!

I think it's a reflection of the Canadian entitlement surrounding health care - ie all health care should be free / I shouldn't have to pay for any health care expenses.

 

[sags]

To credit card companies "deadbeats" are the people who don't incur interest charges.

 

[ian]

I once worked with a company that had many auto dealerships. They were considering a new IT system. The language, like other industries, had terms specific to that industry. Several of the participants asked about how the system would identify and handle the cockroaches. I was a little taken aback until I realized that in their parlance was someone who took a car on time, leasing or finance, made one or two payments, and then stopped paying. Often these same people did it several times over.

 

[RBull]

Always the business cynic......

To credit card companies "deadbeats" are those who default on their obligations- same as in the rest of society.

People who don't incur interest charges are simply less profitable customers.

 

[Userkare]

To credit card companies "deadbeats" are the people who don't incur interest charges.

LOL, that's right!

I remember hearing someone on TV in the CC business say something like that. I'll stick with the definition of 'dead-beat' as someone who lacks the moral and ethical character to pay for what they take, and people who pay 20%+ CC interest as 'suckers'.