Your credit history is your credit history. In the same way that a resume tells about your work experience, your credit history shows the details of how you have managed your credit accounts. To qualify for a loan or credit card helps to have a good credit history.
This guide will explain the difference between credit history, credit report, and credit score. We’ll also show you how to establish or improve your credit history.
This is what we are going to explain:
- What does my credit history include?
- What is a credit report?
- What is a credit score?
- Why is my credit history important?
- How do I establish my credit history?
- Tips to improve your credit history
- Opportunity: Affordable personal loans, no credit history required
important points
- In the same way that a resume tells about your work experience, your credit history shows how you have managed your credit accounts.
- Lenders look at your credit history and your credit score to decide whether to approve you for a loan. However, the two are not the same thing.
- Establishing your credit history takes time. You can improve your credit history by making your loan and credit card payments on time each month and keeping your debt low.
What does my credit history include?
Your credit history shows the details of your credit accounts and your payments. It includes:
- The number of credit cards and loans you’ve had
- What credit accounts do you currently have open?
- How long have you had each account?
- The amount you owe on each account
- If you are behind in your payments
- The number of recent inquiries lenders have made.
What is a credit report?
When you apply for a loan or take out a credit card, most lenders send this information to credit reporting agencies, also called credit bureaus. The three main credit bureaus in the country are:
- Equifax
- experience
- TransUnion
Each bureau takes this information and creates a credit report.
- To your name. These reports identify you by your: Name
- Date of birth
- Home
- Telephone numbers
- Social Security number
Your credit reports show the details of your credit history. They may also include information about bankruptcies, foreclosures, liens, or financial judgments against you.
Once a year, you can receive a free copy from the three credit bureaus through the Annual Credit Report.
.What is a credit score?
Your credit score is between 300 and 850 that companies use to decide how likely it is that you will make your payments on time. The higher the number, the higher your credit score. A score of 670 or higher is considered good.
Your credit score is calculated based on your credit history, and each element has a percentage value for the score. The most widely used credit scoring method is FICO ®.
FICO gives these percentages to each element of your credit history:
- 35 percent: Payment history
- 30 percent: Current debts
- 15 percent: Age of credit history
- 10 percent: New credit (recent accounts and hard inquiries)
- 10 percent: Credit mix (types of credit accounts)
This means that your payment history is an essential part of your credit score in the FICO score.
What is the difference between credit history, credit report, and credit score?
In a nutshell:
Credit history: The details of your credit use, past, and present
Credit report: A written or digital record that contains your credit history Credit
score: A three-digit number that corresponds to your credit report
Why is my credit history important?
Your credit history is essential because it shows lenders how responsible you’ve been in paying your debts in full in the past.
Your credit history can affect many aspects of your financial life, including:
- Credit cards and loans. If your credit history shows that you’ve made your payments on time and manage your credit responsibly, you’ll have a better chance of having your application approved by lenders.
- Interest rates. A favorable credit history often allows you to qualify for lower interest rates on credit cards and loans.
- Insurance premiums. Home and auto insurance companies also consider your credit history when deciding your interest rates. You can get ‘better rates and lower insurance premiums if you have an excellent credit history.
- Mortgages and rents. Your credit history affects your ability to buy or rent a home. You can usually get a larger mortgage at a lower interest rate if you have a positive credit history. If you are renting, the landlord can also see your credit history. Like lenders, homeowners want to make sure they get paid on time.
- Job application. Some employers also look at your credit history. For example, suppose handling company finances will be part of the job you’re applying for. In that case, your credit history can show a prospective employer how well you’ve handled money in the past and how trustworthy you are.
- New business. If you prefer to be your boss, you might want to start a new business. To qualify for a business loan helps to have a good credit history.
As you can see, having a positive credit history gives you more financial opportunities.
How do I establish my credit history?
More than 100 million people in the country have no credit history. If you are one of them, don’t worry. Here are some easy ways to start building your credit history.
Apply for a personal loan or standard credit card
You can start by applying for a personal loan or a credit card. Remember that not all lenders will approve you if you don’t have a credit history. Look for lenders like Oportun, who specialize in giving loans to people with little or no credit history.
Become an authorized user
Another way to establish credit is to become an authorized user of someone else’s credit account. You can do this by asking a family member or friend with good credit to add your name to their account. This gives you the benefit of having that person’s credit payments on your credit report. Being an authorized user is a great way to help establish a positive credit history.
Apply for a secured credit card
If you can’t get approved for a standard credit card, you can try applying for a secured credit card. These cards require you to deposit money into a secure bank account. Then you can now use the credit card to make purchases. By making your payments on time, the lender will report this to the credit bureaus, allowing you to establish your credit history.
Apply for a loan that builds credit
A loan that helps you build your credit works a lot like a secured credit card. After you are approved, the loan amount is usually deposited into a bank account. At the same time, you make regular payments to the lender, who deposit this money into a secure bank account in your name. You receive the money when the loan amount and interest have been paid in full. Your payments on time are reported to the credit bureaus and become part of your credit history.
Tips to improve your credit history
Maybe you already have a credit history, but it’s not as positive as you’d like. How can you improve it?
Always make your payments on time.
Your payment history is the most crucial part of your credit history. Every payment you miss can affect you. To make sure you never forget to make a payment, it’s a good idea to:
- Create a budget and follow it to the letter
- Schedule automatic payments for your regular bills
- Put reminders on your calendar for before payments are due
Keep your account balances low.
Another good habit is to keep your credit balances low. This means that you do not charge too much money to your credit cards. So you can stay current by making small, frequent payments on balances throughout the month.
Please do not apply for new credit unless you need it.
Every time you apply for new credit, the lender asks for information about your credit report. This information also stays on your credit history and temporarily lowers your credit score, so it’s best not to apply for new credit unless you need it.
Opportunity: Affordable personal loans, no credit history required
As you can see, your credit history is essential. If you’re trying to establish a credit history, you’ll want to apply for credit with a lender who understands your situation.
At Oportun, we make credit affordable for people with limited credit histories. We’d be happy to review your application, even if you have no credit history.
If you are approved, you can establish your credit history and improve your financial future. Go today if you pre-qualify with Oportun.
