Viewing a single comment thread. View all comments

astajaznan OP t1_ja8a2qy wrote

Reply to comment by TehWildMan_ in Eli5 credit score please. by astajaznan

What I noticed on various memes, etc., is that the more you use your credit card, the more your credit score increases. If you want to take out a loan from the bank, the higher the credit score, the better chance you have of getting a loan. Aren't people who use credit cards a lot more risky to the bank, in the sense that they might not have enough funds to repay the loan if they spend a lot? What's the catch, since I can't understand the principle?

3

whomp1970 t1_ja8brqs wrote

The calculation of your credit score is quite complicated, and some of the decisions are not entirely sensible.

But think of it this way: If you use your credit card a lot, and you keep making the required payments, that makes you more trustworthy. If you NEVER use your card, then you never have an opportunity to "pay on time" (because you never charged anything), so they really can't tell if you're trustworthy or not.

6

TehWildMan_ t1_ja8abof wrote

> Aren't people who use credit cards a lot more risky to the bank, in the sense that they might not have enough fund

Look at it another way, a person who for years has been able to handle having a few hundred dollars in revolving accounts, and never missed a payment, would appear as a lower risk than someone who has never had any kind of loan before.

3

astajaznan OP t1_ja8aymr wrote

I assume you are from America. In our country (in the Balkans), a completely different logic prevails. Although I believe that this principle will come to life in our country at some point, since we follow the trends, and America is always light years ahead of us.

1

Bensemus t1_ja9l0is wrote

Using the credit card responsibly looks good to the bank. However you can also use it poorly which looks bad to the bank. So just having a credit card isn't enough. They look at how you are using it.

1