Your credit history is a series of stories told by your credit accounts. The major credit unions – Equifax, TransUnion and Experian, all keep records of your credit accounts as well as payment history. Altogether, this information is very important when you apply for new lines of credit – cards, mortgages, loans, and even mobile contracts.
What do the credit bureaus do with your credit history?
Your credit history is a useful tool to determine your creditworthiness and financial responsibility. Your credit score is determined by credit bureaus through your history, and this gives a summary to your potential creditors about the likelihood that you will be able to pay off your debt in the long run. Furthermore, potential creditors examine your credit history to look at your reliability, enabling them to set their lending rates.
By establishing a positive and healthy credit history, you can expect lower mortgage rates, lower insurance premiums, a lower APR for your cards, and even better rewards on your credit cards.
What types of information make up your credit history?
- Your credit accounts
Any cards, loans, mortgages, and other lines of debt all go to your credit history. It also shows when the account was issued, any amounts or balances owed, as well as the credit limit for our cards. Most importantly, your payment history is also included.
- Credit checks
When you apply for a new credit line, it is very likely that the company you are applying to will look at your credit history, initiating a hard check on your report. While these kinds of checks could deduct a couple of points from your score and as a result, negatively impact your overall history, the impact will generally decrease over time.
- Derogatory marks.
If you are delinquent when it comes to paying on time, and your account is then forwarded to a collections agency, then the account in question will be marked in your credit history. This will indeed lower your score significantly, and are likely to stay in your credit history for as much as ten years.
- Payment history.
If you pay on time every month, it will help your score positively. However, if you are late by 1-3 months, then it will be noted on your history and will also dent your score significantly. The later the payments, the more points that will be taken from your credit score.
What types of information do not make up your credit history?
- Your checking and savings accounts
These are not lines of credit and are not debt accounts, and as such, will not have an effect (or even be considered) for your credit history
- Your income, race and age
These are irrelevant factors when it comes to your creditworthiness and as such, will not appear on your credit history
What if you found errors on your credit history?
By keeping your credit history accurate and updated, you are more likely to have a good credit score. However, if you find that there are errors on your file, it is imperative to report them immediately to have them corrected, to ensure that there are no fraudulent entries on your file that could potentially hurt your overall standing.