Commonly, when you talk about credit card history; how the credit card was established will come into your mind. However, that will be discussed in another article. We will focus more on the importance of your credit history in relation to your application for a credit card loan or other types of loans.
Nowadays, people’s lives revolve around credit history and credit score. However, in order to build your credit history and credit score; you will need a credit card.
First time users of credit cards may find it confusing and overwhelming. When regular users of credit cards talk about APR, balance transfers, credit report, credit score, cash back, rewards, mileage, et cetera; it could be way above your head.
Spend sometime with us here to learn about credit history, credit cards and how it will affect your finances in the future. It is best to learn about the first time credit cards and credit cards with no credit history.
You can frequently learn about people getting in trouble because of their failure to take care of their credit card history. They made mistakes with opening several credit accounts, numerous credit cards, multiple balance transfers and letting friend use their credit cards.
The Importance of Good Credit Card History
You will be able to appreciate having a good credit card history when you plant to purchase a home or car, rent an apartment, or open other accounts such as cell phone, water, gas, and others.
Having good credit card history is similar with having excellent GPA and GRE score. With a good credit history, you can easily get approved for a loan. You will not only get approved, but you also have the chance of getting a low interest loan or credit.
You must remember that your credit report include your credit history, which the three major credit bureaus have, and the banks report all your billing activities to the credit bureaus. That is the importance of your credit card history.
Relationship Between Your Credit Card History and Credit Score
An important factor in increasing your credit limit isunderstanding the role your credit card history plays in determining your credit score and how your credit limit will affect your credit history in return.
Credit card companies’ decision on increasing your credit limit is largely dependent on several testing and analysis. Here, your credit history is crucial. Underwriting is the method by which card companies decide who to approve, at what credit limit, and at what rate.
Actually, the underwriting guidelines used by the card companies differ and are guarded company secrets. However, the relationship between your credit history and credit score becomes very clear when the purpose of underwriting credit cards is considered.
A credit card holder’s credit history can, among other factors, indicate their payment habit, purchasing style, and an overall management of their credit that will eventually increase or decrease their credit score.
Based on your credit history and credit score, the credit card company can calculate your expected default rate and help them determine if an increase in your credit limit will provide them with an opportunity for additional revenue, or a reduction on your credit limit is crucial to minimize their risk of losses.