Is My Credit History Overrated?

Top Reasons Why Your Credit History Is Important

Learn About Credit HistoryThe importance of your credit history is absolutely not overrated. Your credit history information is of interest to a lot of people. A bad credit history can increase your monthly mortgage payments, drive up your insurance premiums, and make it harder for you to obtain phone or cable service. Landlords and some potential employers can and will also look at your credit history report.

How credit history reports work

A credit history report shows how you've managed your credit so far. Every time you pay your bills or apply for credit, you're building credit history, and that information is noted by the national credit reporting agencies. When you make mistakes with your credit, those mistakes show up in your credit history information, too.

Your credit history determines your credit score, which is an overall rating of your "riskiness" to lenders and other businesses. A high score, 700 or higher, is good. A low score, less than 600, is not so good.

How credit history reports benefit you

A good credit history will benefit you in almost any major purchase that requires financing - buying a home, getting an auto loan, or setting up a business. When lenders review your credit history information, your credit score plays a big role in setting your interest rates and repayment terms. If your track record of building credit history is excellent, your efforts will save you money on interest charges. The same rule applies to insurance coverage; a high credit score means lower monthly premiums.

Landlords will use your credit history to gauge how likely you are to pay your rent on time. Phone companies and cable service providers examine your credit history to determine if you'll be a responsible customer.

The costs of a bad credit history

Credit history information always lags behind your real-time credit decisions. However, bad credit decisions tend to yield negative effects faster, and those effects linger for years. A credit history check that shows a record of bankruptcy, collection liens, foreclosures, and other financial missteps can affect your ability to get an affordable mortgage, rent an apartment, or even get a good job.

What can you do to protect your credit history?

Make positive changes now. Get your credit score and report and take steps to monitor your credit. Proactively managing your credit history will eliminate any unpleasant surprises for you when lenders, property managers, and potential employers investigate your financial reports.

Building a good credit history takes time and patience. Make your payments on time, and carefully manage your open accounts. By managing your finances responsibly, your credit history will improve, which should eventually have a positive impact on your credit score.


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