Why I got myself a line of credit... even though I don't "need" it

So in January of this year, while discussing opening a Direct Investing account inside my TFSA, I asked and allowed the consultant I was with to do a soft inquiry on my credit score.

About a year and a half ago, I had attempted to open a line of credit at my bank on the recommendation of a financially savvy friend, though at the time it was sold to me as a means to transfer the balance on my credit cards to this other form a credit that has a much lower interest rate than the 18.99% I was getting dinged with at the time.

Lines of credit (or LOCs) are like a hybrid of a bank loan and a credit card. They're like loans in that you have to apply and qualify through your bank for a lump sum of money, but unlike standard loans, you don't receive the full sum of money that you qualified for right away. Rather, it is flexible like a credit card in that you can draw on the money as needed. But unlike credit cards, that involve a system of borrowing money within a borrowing limit and than paying it back, the money in an LOC is a pool of money earmarked for your uses at your convenience by the bank and therefore "yours."

Although let's be honest, using money from a line of credit is still basically borrowing. It is still debt when you use it, though borrowing at a reasonably lower cost than you would on a credit card purchase you don't pay off within the first statement. As a result, like loans, banks do reserve the right to recall the full amount borrowed when they deem it necessary, often at the worst possible time for you.

Back then, I didn't qualify for an LOC.

The reason I didn't qualify basically came down to the fact that the bank looks at LOCs like it's a loan, so it's not something they give out as freely as credit. And given my uncertain-looking income (I had just been promoted to a full time position at work, but as of the moment there was no history of stable employment with my employer) combined with a whackload of debt between my credit card and student loans (close to $45,000), I certainly wasn't the model candidate to them.

Essentially, I came down as too much of a risk to provide an LOC to.

But the idea to get one remained with me. And as I became more or less financially aware of things, I further learned that besides the lower interest rate, the LOC can help diversify my credit report and score without actually taking out an actual loan.

Yes it's more potential for debt, but as debt doesn't really tempt me and I'm none too keen on going into it any more than I already have, I also felt it was something I could manage. Not to mention, it's a heck of a safety net in extreme events and sure beats having to resort to a credit card, even if you really shouldn't rely on any kind of debt as a safety net frankly.

In January, a year after paying off my credit cards and around $10,000 of my student loan debt, guess what? I qualified.

It made me happy, because it meant that my credit and my debt was actually becoming manageable. Basically I took it as a good sign that my finances were actually becoming healthy for the first time since I became an adult.

And after a few weeks to consider further, I took it and the hard inquiry. Because I'm big on having as many blankets of security as I can get for an added peace of mind.

Here's hoping I don't come to regret it.