When talking about credit history, it is most likely related to how someone handled debt in the past and what is going on with their money right now. Credit history can include information about the accounts a person has opened, how long they've been open, and if the account holder made timely payments.
But there's a lot more to learn, such as how credit history is included in credit reports and how it affects credit scores and lending decisions. Understanding how these elements fit together will help you better manage your credit. And this post will help explain some of the basics.
What Is Credit History?
Credit history is a record of how a person handles his finances like money, debts, credit cards, and other existing loans. A credit history may include information about a person’s account, how long they’ve opened, the in and out of the money on the account, and whether the account holder made payments on time. It starts when you apply for a credit card or a loan and can influence your financial life, so it’s important to build and maintain a positive history.
- Wondering how a credit history makes its way to a credit report?
- How do your financial decisions affect credit scores?
- What things you should or should not do to maintain a good credit history?
These are just some of the questions you might have in mind, and to understand and answer these, let’s dive deeper into credit history.
What Is A Credit Report?
A credit report is a detailed listing of all your current and past debts, your credit cards and loans listed on your name how much you owe to lenders, and If you are good in paying your debt in time.
Credit score, on the other hand, is like a measure of how a lender can see you as trustworthy with money to pay for a loan. It’s a prediction of your credit behavior based on the information from the credit reports. It has a score ranging from 300 to 850.
Factors That Affect Your Credit Remark
There are things that affect your credit rating, including payment history for past and current debt, how you maximize your credit limit, and the length of your credit history.
So basically, it is a report on your debts, repayment of debts, and how you responsibly repay all of them. It is then added to your credit report, which includes a full breakdown of the number and types of loans that you have, the amounts owed, available credit used, the number of recent credit queries you have made, and invoices you have paid on time. It also indicates whether you have any bankruptcy, liens, or collections.
If you’re wondering how you can access information on your credit history, you can ask for a free copy of your credit report from credit bureaus.
You can see steps and view your updated credit reports at no cost online, too. Viewing it free online gives you an advantage to monitor if there are any changes in your credit.
Importance of Credit History
Credit history is extremely important, especially to lenders. When you apply for a personal loan, credit card, mortgage, and more, the information on your credit history is used to decide whether they will lend you financial help or not. They will also use the information on your credit history to calculate your credit score.
Lenders will review the credit history and assess your recent activities, the patterns, and regularity of repayment over longer periods. It’s good to have a positive credit history for a better chance of getting approved.
Good Credit History
When can you say you have a good credit history? It’s simple, having a good credit history means that you are paying your bills on time and you’re not carrying large amounts of debts with you. Having a good credit history means you are a lower-risk borrower. Getting a good credit history can get you a better chance of being approved for loans and having a lower interest rate.
You can maintain a good credit report by paying all your bills in full on time every month. Keeping at least one credit card is enough to maintain and keep the balances low, don’t exceed your limit and only use 30% of your available credit. By checking and monitoring regularly you can determine if there are any errors and can correct them as soon as possible.
Bad Credit History
Contrary to good credit history, bad credit history means you are not paying your bills on time and have a large amount of outstanding balance.
The question is: What can contribute to a bad credit history? Excessive use of credit cards above the limit, late or missed payments, having a lot of credit cards, and other financial loss.
When you have bad credit, it can lead to lenders finding it difficult to give you a loan, and if so, it will be at a higher interest rate and credit limits are low.
How can you turn bad credit history into good credit history? It’ll take time, and it may take years but slowly you can do it by paying your bills on time, cutting unnecessary credit cards, and checking your credit score which has the most negative factor, and starting from there.
Having No Credit History
Individuals who have no credit history are sometimes from the group of young adults and college students who don’t have yet credit cards or bills that are named to them. Having no credit history means it is difficult to get approved if you seek financing as credit history demonstrates the ability of a person to make payments on time.
How to start having a credit history?
You can start by taking small steps. Apply for a credit card that has a secured deposit. You can also become a supplementary user on another person's credit card and build your credit history. Don’t maximize the use of your credit card and paying your bills on time can help you get a credit history and a good one.
Having the right knowledge to understand your credit history can lead you to good credit history. A good credit history can open doors for financial opportunities, increasing your chances of approval with lenders when you apply for a loan.
Having a good credit history also means you are offered better rates on loans. When you know what goes into your credit history, there’ll be fewer problems and you can strategize how you can maintain a good and strong credit report.