If you have any sort of credit history, you’re probably being bombarded every day with offers for more credit cards. But if you don’t have anything on your credit history, your mailbox is probably empty.
A third of Chicagoans are unbanked, and the percentage of Latino households who don’t have bank accounts, checking accounts or even credit cards is even higher. When you’re living in a cash economy, it’s hard to establish a credit history but it’s never been more important to try.
Although millions of Americans are accessing www.annualcreditreport.com for their free credit history, others are wondering what the fuss is all about.
“The credit report is merely a historic documentation of someone’s life. Whatever happens in your life can be interpreted on your credit report. You get sick and you’re in the hospital. You’re not paying your mortgage on time. It reflects on the credit report,” says Os Owen, Center for Economic Progress.
If you don’t have a credit history, it’s a lot tougher to get a credit card, not to mention an auto loan or a mortgage or even a job.
“Employers now are looking at credit reports for pre-employment because it goes to character. It shows someone’s history. It shows their lifestyle,” Owen says.
If you don’t have credit, you can start to establish it by opening up a savings or checking account.
“It provides a means for people to research how you’ve paid your bills. So, it’s important to be banked and establish those relationships,” says Judy Rice, City of Chicago treasurer.
But cashing checks at your local currency exchange won’t help you create credit.
“Let’s face it. A currency exchange isn’t going to be on your credit report, isn’t going to help you get a mortgage, isn’t going to help your credit history and credit score. You’ve got to bank within the traditional system,” says Congressman Luis Guitierrez.
Because so many Americans live in a cash economy, banking regulators are now looking at non-traditional forms of credit as a means of establishing credit-worthiness for those who want to buy a car or house. Lenders now routinely look at how consistently consumers pay the rent and their utility bills.
“We can show a lender, yes, they’ve made this payment. They are responsible,” Owen says. Congressman Gutierrez also wants lenders to consider the weekly and monthly payments Latinos regularly send home to their loved ones as evidence of their credit-worthiness.
“If they can send consistently money back month in and month out, and you see that year in and year out, shouldn’t that count for some kind of credit worthiness?” Guitierrez says. The Federal Reserve Bank thinks it should.
“Bankers or anyone lending money to individuals have to look at the person in his or her entirety. It’s not just the typical assets the individual may have, but they’ve got to look at earning power as well, and the broad range of resource that person has,” says Michael Moskow, Federal Reserve Bank of Chicago.
If you’re looking to create a credit history of your own, go to wgntv.com and take a look at the schedule for the rest of Money$mart week. You’ll find several opportunities to take a free seminar about how to improve and maintain your credit history and credit score. You may also want to pick up a copy of Red Eye this week, for more information on Money$mart week.
Need personal finance advice or real estate advice? Send your questions to Ilyce Glink: www.ThinkGlink.com
Published: May 25, 2005