Link between Credit Cards, Credit Score and Credit History

Life is US is tightly knit around Credit Score and Credit history. To build your credit score and credit history, you would need credit card.

When I started learning about credit cards, it was all confusing. When seniors talk about balance transfer, APR, credit score, credit report, rewards, cash back, etc it was way above my head. That was when I was new to USA and just getting my feet wet about financial rules and regulations.

Spend sometime to learn about credit cards, credit history and how it will impact your finances in long run. Do your research to find out

  • Good student credit cards
  • First time credit cards

I have seen many of my friends get in trouble, because they failed take care of their credit history. They messed around with credit cards, opening several accounts, multiple balance transfer and getting add-on cards with friends.

Importance of Good Credit History

You will know the importance of having good credit history when you plan to

  • rent an apartment
  • buy car
  • buy home
  • opening other accounts (water, gas, cell phone, ..)

Having good credit report is like having very high GRE score and GPA. You have higher chances of getting loan with low-interest rate with good credit history (similar to getting admit in good universities).

  • Credit report contains credit history.
  • 3 Credit Bureaus have your credit history
  • Banks report your billing activity to credit bureaus

How to Build Credit History

You build your credit history by paying bills on time. Cars and home mortgages are big-ticket items. Your credit history will show your payment history. If you can pay your credit card bills on time, that’s indication that you will be able to make large payments on time.

So, if you want to build your credit history, do that following

  1. Get  a credit card
  2. make purchases using credit card
  3. pay bills on time ( avoid carrying balances)

What is APR

ARP stands for annual Percentage Rate. It’s the interest rate on your card. APR on the card varies based on terms of the card.APR can be

  • Fixed  ( bank can change it after informing you)
  • Variable (rate changes based on finance markets)

When you apply for student credit cards, you will typically get introductory ARP of 0% or low APR for 6 months to 1 year. Don’t fall into this trap of not having to pay interest for long periods of time. If you max out your card without paying monthly bills on time and when introductory period is over you will have to pay interest rates on your balances.

Before you apply for a card, make sure you completely understand the credit cards terms and conditions in fine print. Key is to find a credit card with low ARP.

Next Post

Now you have learned the basics about credit card, in next post, I will write about

  • How not to apply for credit cards
  • How many to credit cards to apply
  • Which students credit cards to apply
  • My favorite credit cards ( Discover, American Express, Visa, Master Card)

Next >> Best Student Credit Cards

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  1. how can exchange money in usa?? how much amount a student in generally gets during his phd programme??

  2. Hi,

    Here is what I think I should do, please correct me if I am wrong.

    I have a Citi Credit Card(Student one) with APR zero till May'11, I think I can pay minimum balances till May'11 and after that I should make the full payments month by month.

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