How Does Good & Bad Credit History Affect Your Credit Profile?
Introduction to Credit History
Your credit history tells about your borrowing behaviour. It is a mirror of how responsible you are about your debts. Your credit history contains the record of your loans, credit cards, and credit accounts. When you opened them, how much money you took and did you repay that money in due time? Your credit history is a consolidated record of your every debt.
You can collect it from a credit bureau or government-approved websites yearly. We will explain the importance of good credit history and the disadvantages of a bad one ahead in this article.
Significance of Credit History
The banks and financial institutions have access to your credit report. Your credit history is mentioned in detail in your credit report. If you apply for a loan or a credit card, these lenders check your credit report first. Based on your previous record, they will decide whether to extend credit to you or not.
They will check your repayments, any default, time durations of your loan or credit card, etc. Your FICO score is also based on your credit history. This score is also an essential factor in deciding your creditworthiness.
Difference Between Credit History and Credit Report
Credit history is a significant part of your credit report. Your credit report is a collection of your credit history and other details like your new and old address, employer, etc. Three credit bureaus generate your credit history report. They are TransUnion, Experian, and Equifax. You can collect a free copy of your credit report from the authorities. It would be best to do regular credit history checks to ensure no incorrect data in the record.
Good Credit History
A good credit history improves your credit history report. That brings you into the good books of the potential lenders. You should know everything that makes your credit report fine and start doing that from today. They see you as a responsible borrower if you pay dues on time and don’t default. Your credit report shows your timely payments and pre-payments as well.
You get empowered with choices if you can showcase a good credit report. You can get a loan from any bank you want. Your loan requests and credit card applications will be processed early. And you will get reasonable interest rates in case of a personal loan.
Bad Credit History
A bad credit history report indicates you as an irresponsible buyer. So stay away from the wrong credit habits, which leads to a bad credit report. Your outstanding debt, late payment of bills, and defaults will put you in an undesirable light in front of lenders. Applying for multiple credit cards in a short time reflects negatively. The bankruptcy and settlement accounts also project instability. Over usage of credit cards are also not recommended.
No Credit History
Lack of credit history will not go in your favour when you apply for a big loan. You need to give some records to the banks and lenders to judge you. This could be a problem for youngsters or college-going students. As they don’t have enough income to apply for credit. But you can apply for a small loan or a credit card and repay your debt on time to create a credit history.
If you don’t have a credit history, you should start creating one. Make sure you remain to steer clear from creating a bad credit history. And follow all the financial activities to support a good credit history report. Also, do regular credit history checks to set the records right.