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, credit histories are 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.

And it's a tossup whether no loan or one with a higher interest rate is the worse option for consumers, says Janet Garkey of the Credit Union National Association for Personal Finance. The difference in the rate on a $100,000, 30-year, fixed-rate mortgage for someone with a 520 (poor) score and a consumer with a 720 (borderline good) is 3.45%, says Garkey. That translates to $235 per month in payments and $85,000 over the life of the loan.