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Debt Management Guide 2008
How credit works
It's tough to manage debt if you don't know how credit works. Learn about good credit and living with no credit.
How credit works
Life without credit: tough and expensive
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The second vulnerable group is the immigrant population. That's because credit histories can't cross international borders. So if you live in Montreal with spotless credit and decide to move to Miami, you're starting from scratch with no credit history.

"The U.S. is not synched up with other international systems," says Watts.

And there are several other groups that may fall into the no- or low-credit history category:

Groups with no or low credit history

It's difficult to make assumptions about income, too. "It tends to be lower -- and some middle -- income," says Nick Jacobs, spokesman for the National Foundation for Credit Counseling, an umbrella group of local nonprofit credit counseling services. "There are some middle income people who just haven't built up enough of a file yet."

But some very wealthy individuals are also living without credit. "The very wealthy often don't have credit," says Linda Sherry, spokeswoman for Consumer Action, a D.C.-based advocacy group. "They have no need for it -- they pay for things with their checkbooks."

The real cost of no credit
Credit histories were originally developed as financial tools to help lenders (usually for mortgages and credit cards) assess whether consumers would pay their debts. Today, it's being used as a screening tool for everything from jobs to insurance rates. Little, no or poor credit can make it more difficult -- and in some cases impossible -- to get a home, car or even some jobs.

But the biggest cost is financial. Life costs more when you can't access credit. It's also harder to do the things most consumers take for granted, like driving to work or throwing in a load of laundry.

Without access to normal credit, people either do without items like cars, washing machines and furniture until they can save enough to pay cash or they obtain them at higher than normal rates. Those who can't pay cash or talk a lender into taking a chance on them sometimes turn to businesses that charge higher-than-retail prices for furniture and electronics, and lenders who offer high interest rates for payday, car tag loans or auto loans.

-- Updated: June 16, 2008
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