What Does a Credit History Entail?
If you’ve ever taken out credit, chances are this information will form part of your credit history. In short, a credit report outlines your spending and repayment activity with financial products including credit cards, bank overdrafts and mortgages. Other financial activity including phone contracts, television and internet packages, electricity, gas and other utilities can also form part of your overall credit report.
Regardless of what you’ve taken out and used credit for, this information is most likely visible on your credit report, giving potential lenders an insight into your financial health and most importantly, the ability to repay any credit borrowed to you. If you ever intend to take out credit, it’s crucial you maintain a healthy credit score. For most people, the biggest financial products they’ll be chasing are mortgages and large capital loans.
The Importance of a Good Credit Score
Unless you’ve maintained a healthy credit score for several years, your final credit score will likely be poor and discourage lenders from lending money to you. Although individuals with relatively poor credit scores can still succeed in mortgage and loan applications, a lower score will affect the ultimate amount that is borrowed to you, while interest rates and additional charges may also be affected if you’ve shown less financial responsibility and an ability to make repayments on schedule in the past.
A solid credit history is also important for more everyday needs. If you’re looking to rent a home or office space for example, a landlord may wish to view your credit report to determine your eligibility. A poor credit score and a history of late repayments will signal a red flag to potential landlords.
A history of overspending with borrowed credit will also signal a poor accountability of finances to potential lenders, so those looking to lock down mortgages and loans in the future should think seriously before looking to secure loans for more frivolous items and unnecessary spending.
Whenever you decide to apply for credit, also ensure you can make the required payments on time to protect your credit score. Additionally, before taking out loans or applying for credit of any kind, thoroughly inspect your existing credit history to assess your overall financial standing, while also giving you the chance to identify any erroneous notes on your credit history.