It might seem counterintuitive in our debt-fearing culture, but spending money you don't have (yet) can be a very good thing. Your history of taking on debt, buying things on credit, can be the difference between getting approved or denied for your new home. Beyond that, it can determine how low of an interest rate you can get and, ultimately, how much money you will pay for it.
For better or worse, a person's credit history is used as a barometer of trust and reliability. A person with several credit cards and a mid-level to high credit score and no late payments is viewed as a stronger loan candidate than someone with no debt and a vague credit history. As unfair as that may seem, a lender wants to see borrowers with a proven track record of making regular, full payments and thus less likely to miss any mortgage payments.
To increase your chances of getting loan approval, make sure you already have some form of credit and that you use it. Keeping a low balance on your credit card - and making at least the minimum payment each month - can build your credit score, positioning you as a more attractive candidate for a $200,000 mortgage loan. This article does a great job of explaining why this borrowing principle empowers you in our lending economy.
Raising your credit score can help you get jobs, new phones, new cars, new homes - the list goes on. It is worth digging into if it can save you thousands of dollars in the long run. Generally, you want to aim for a credit score of 700 or above to guarantee loan qualification. If building credit is a goal for you, check out this list of ways to improve your financial security.
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