Credit history is a main component of an individual’s credit score. It is a record of an individual’s ability to repay loans and debts that they have accumulated throughout the years. Generally, a few different sources such as a bank account, loans, and credit card companies are combined to create a credit report.
Credit histories are built by combining several different factors. This includes the number and age of accounts an individual has had throughout the years both open and closed. It also includes the debt accumulated in each account and payment history. The payment history shows whether bills were paid in a timely manner and notes late payments and collections.
Lenders use credit histories and reports in calculating risks and rates. Additionally, it contains information regarding bankruptcies, liens, collections, and court orders.
Having a good credit history and report can greatly benefit a borrower. Typically they will receive lower interest rates and terms on a mortgage or car loan. Those with a less positive report may not have a loan approved or may pay higher rates for a similar loan due to risk. Landlords also tend to look into an individual’s credit history when negotiating with potential tenets.
There are also some without an established credit history. Typically this is the younger demographic and new migrants. Those without a credit history may face the same issues as those with a bad credit history.
Bad credit histories can be repaired in time and there are several companies that assist individuals to improve their scores.