As experienced Dallas-Ft. Worth real estate professionals, we know that some people avoid using credit like the plague. Perhaps you’ve had issues in the past with mounting credit card debt or you’ve seen the devastation that overextending your credit can cause. Maybe you’ve never had a credit card and you want to keep it that way. Regardless, it’s important to know that completely avoiding credit can actually hurt you when it comes time to buy a home.
Credit can be a good thing or a bad thing; it’s all in how you manage it. The thing is, a credit report is analyzed in more situations than just purchasing a home! If you ever intend to buy a new car, new furniture for your apartment, or even apply for a personal loan, credit will matter. When you avoid using credit lenders, landlords and others have nothing to help them determine whether you qualify for financing or how well you’ve handled your finances in the past. Ultimately, not having any credit at all can be just as damaging as having bad credit.
Most people equate credit with debt, and this is a fallacy. It’s also important to consider the fact that not all debt is the same. For instance, if you have thousands of dollars in unsecured credit card debt, it is indeed a bad thing. However, borrowing money to buy a Dallas-area home would be considered a positive thing by most people, because of the fact that real estate only grows in value – you are essentially investing in your own wealth.
It’s really about achieving the right balance. While you never want to find yourself going under because of credit card debt, you do want to build good credit. When it comes to credit cards, never charge more than you can pay off when the next bill comes in. Even if you pay the minimum amount due each month (or even more), as long as you have an outstanding balance on credit cards it will negatively impact your credit score.
Don’t avoid credit completely, because in the end it will come back to bite you should you decide it’s time to buy your dream home. Know the difference in racking up credit card debt and using credit wisely. You need a credit report and a good score for many of the necessities and enjoyments in life!
If you’re trying to buy a Dallas area home, count on Team Nelson to help you find your “home sweet home,” while staying within your budget. We’re the Dallas real estate professionals who give you the personal attention and time you deserve.