What Is Credit History?

A consumer's credit history is a measure of their ability to repay debts and demonstrated responsibility in repaying debts. A person's credit history is recorded in their credit report. A consumer's credit report details the number and types of credit accounts, how long each account has been open, amounts owed, the amount of available credit used, whether bills are paid on time, and the number of recent credit inquiries. 

A consumer's credit report contains information regarding whether the consumer has any bankruptcies, liens, judgments, or collections. All consumers are guaranteed access to their credit history (via a credit report) and are eligible for one free credit report from each credit bureau on an annual basis.

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What Is A Credit Score?

Key Takeaways

  • Credit history is a record of a consumer's ability to repay debts and demonstrated responsibility in repaying debts.
  • A consumer's credit report includes information about the number and types of credit accounts, how long each account has been open, amounts owed, amount of available credit used, whether bills are paid on time, and the number of recent credit inquiries. 
  • Consumers will reap rewards for having a good credit history—from being offered lower interest rates on mortgage loans to lower rates on car insurance.

Understanding Credit History

Potential creditors—such as mortgage lenders and credit card companies—use the information in a consumer's credit history to decide whether or not to extend credit to that consumer. The information in a person's credit history is also used to calculate their FICO score. When creditors review an applicant's credit history, they assess several different factors: recent activity; the length of time that credit accounts have been open and active; and the patterns and regularity of repayment over longer periods of time.

Consumers will reap rewards for having a good credit history—from being offered lower interest rates on mortgage loans to lower rates on car insurance. In order to build up a positive credit history, some credit experts suggest that a borrower continue to make installment payments (rather than outright paying off outstanding debt). This would include paying off interest, not just the minimum amount, in order to continuously reduce the debt over time.

Potential borrowers who have no credit history—for example college-age young adults—may have difficulty being approved for substantial financing or leases. Landlords might decide to not rent out an apartment to an applicant who has no credit history that demonstrates their ability to make payments on time.

For those without any credit history, one can be established by taking out a small personal loan or applying for a credit card with a small available balance. Such usage lets the borrower demonstrate how well they can manage their credit on a limited scale before taking on larger amounts of debt.

Special Considerations

It is possible for a borrower to see their credit history wiped clean if they have paid off all their debts and do not take out a loan, credit card, or other form of financing for a number of years. This interval can be seven or 10 years. Even borrowers who had an extensive prior creditor history could effectively start over if such long gaps occur. For a potentially quicker solution, so long as you're willing to pay a fee, one of the best credit repair companies might be able to have the negative marks on your credit report removed.