A credit history is the record of how a person has managed his or her credit in the past, including total debt load, number of credit lines, and timeliness of payment. Lenders look at a potential customer’s credit history to decide whether or not to offer a new line of credit, and to help set the terms of the loan. Employers and landlords may use credit histories to evaluate job candidates or potential renters.
A credit history offers a detailed look at how many lines of credit — bank loans, mortgages, credit card accounts — you have. Credit bureaus monitor your credit history, and they generate credit reports that detail your credit history at your request or for lenders or other institutions that need to review your creditworthiness.
Your credit history details how many inquiries there have been for credit reports, in addition to any negative actions taken against you, such as property liens or court judgments against you by creditors. The information contained in your credit history is used to calculate your FICO score. Higher FICO scores indicate better creditworthiness.
A good credit history makes it easier for you to obtain credit, while a bad credit history may prevent you from borrowing or significantly reduce your options. If you have a history of not paying bills on time, or you’ve filed for bankruptcy or had accounts go into collection, you may have more trouble doing everything, from finding a place to live to getting a job.
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Credit history example
Antonio has three credit cards listed in his credit history, which details how long he’s had each card, the spending limit on each card, and how much he owes. He also has a car loan and a mortgage, both of which are recorded in his credit history. With most of his funds tied up in his shipping business, Antonio has maxed out his credit cards in an ill-considered plan to help out a friend who has relationship problems.
With the economy in recession, Antonio’s business is in trouble and his friend is unable to pay back the money he borrowed via Antonio’s credit cards, putting Antonio at risk of bankruptcy. He would like to take out a loan to consolidate his debt, but when potential lenders examine his credit history, they demand a painfully high rate of interest.