Probably not, but establishing credit gives consumers financial opportunities they may not have otherwise. When a lender issues you credit, they are giving you payment terms on a purchase so you can buy something today and pay later. Sometimes the lender gives you a payment plan. This means that the lender trusts you to repay the loan installments in a timely manner without paying late or missing payments.

How Does It All Begin?

The first time you buy something on credit, you’ll probably get a small amount and a short repayment program. If you repay this first loan or financed purchase in a timely manner without any delinquencies, the truth on your ability to repay and on your repayment behavior will increase and so will your credit worthiness.

Advantages of Credit

Having the ability to get credit gives you security and financial flexibility. You never know when you may run into a situation that requires emergency cash. With credit, you can take advantage of sale prices on items that you don't have the money for right now. To buy a home or a car, most people need credit.

Credit also gives you liquidity. You may have money tied up in a CD or some other sort of investment that you can't access for awhile. You can use credit to make a purchase and then pay it off when your money is available. This was the main purpose of credit at the beginning, only after some time it began to be used to finance purchases for which people didn’t actually have the money.

Traveling And Credit Cards

Travelers will find that travel agents, car rental companies and hotels require a credit card for a deposit. A debit card, a card that allows you to forego writing checks, isn't allowed in these kinds of transactions. That's true when you rent any equipment, camping gear or even a lap top computer.

Health Care and Credit

With the rising costs of health care, some people use credit to pay for their medical expenses. Although most hospitals will allow you to work out a credit plan, most physicians won't. A credit card comes in handy in a medical emergency. But in any case, if you don’t have the cash for paying for medical services, you’ll need to resort to some kind of financial source.

Credit and Businesses

A credit card helps when you have to keep track of business expenses. A card that you pay off monthly provides a record of all your expenses and let’s you know which ones belong to you as an individual and which ones belong to your business. But even if you are running a company or want to start a business and have separate accounts, having access to credit is unavoidable. Most companies will sooner or later agree with a bank the provision of a line of credit with certain flexibility so they can finance their production chain.