Why maintaining a good credit history can work in your favor?

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Credit Card Applications » Research » Guides » Building Credit History » Why maintaining a good credit history can work in your favor?

Why maintaining a good credit history can work in your favor?


Updated: December 26, 2012

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A credit history is necessary for anyone to lead a normal life in the United States of America. There was a time when one could mange normal day to day activities with just cash. But these days, taking a loan or having a credit account is not just an advantage but a basic necessity for anybody who wishes to establish oneself in the country.

Credit history is something that is maintained by one of the three credit bureaus. The credit bureaus are independent non governmental organizations which continuously maintain a record of all credit transactions made by a particular individual. Each person is assigned a score based on a number of factors and this score is called the credit score. The factors are diverse but generally depend on the debt to credit ratio. The lower your debt to credit ratio is, the better it is for your credit score. The only way to lower your debt to credit ratio is to reduce your debt and increase your credit limits or number of credit accounts. It only goes to show that even though you have the ability to borrow a lot of money, you restrain from doing so.

When you have a credit history, it helps you open new credit accounts or get loans. It not only helps you get these loans and credit accounts, it also helps you get a lower interest rate or higher credit limits on your accounts. All in all, a better score will help you get better terms and conditions on your credit accounts or loans. Even getting a mobile phone connection requires you to have a credit history. If you do not have one, you will have to shell out a huge initial deposit which could be really heavy on the pocket if you are trying to establish yourself. You will also need a credit history to rent an apartment or room in a good neighborhood. If you do not have one, you will have to get someone with a social security number to stand guarantor to you in case you fail to pay up.

The best way to start building a credit history is to open bank accounts first. After opening bank accounts, start applying for credit accounts. Then start using them in order to build your credit history. But more than using them, you need to be able to pay back all your outstanding balance at the end of the month!

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