When people talk about your credit, what it simply means is your credit history. It is your credit history that describes how you use money, how many credit cards you have, how many loans you have and if you pay your bill on time.
If you already have a credit card or a loan from a bank, then you have a credit history. Companies will in turn, collect information about your loans and credit cards. They will also collect information about how you pay bills.
What is a Credit History?
It is the measure of the ability of a consumer in repaying debts. It contains a record of the borrower’s credit history from a number of sources, including banks, credit card companies, collection agencies, and governments. A borrower’s credit score on the other hand is the result of a mathematical algorithm applied to a credit report and other sources of information to predict future delinquency.
Understanding Credit History
Financial institutions like mortgage lenders and credit card companies, use the information in a borrower’s credit history in determining whether or not to extend credit to that particular borrower. Lenders also use a person’s history in calculating their FICO score. Also, lenders when reviewing an applicant’s credit history, assess several other factors. These factors include recent activity, the length of time that credit accounts have been open and active, as well as the patterns and regularity of repayment over longer periods of time.
Potential borrowers with no credit history may have difficulty in being approved for substantial financing or leases. Those with no credit history can establish one by taking out a small personal loan or applying for a credit card with a small available balance. With this, the borrower can demonstrate how well they can manage their credit on a limited scale before taking on larger amounts of debt.
What is a Good Credit Score?
Credit scores range from “0” – “850”. If you are new in the state, you will be at the bottom, because you have no credit history. A low credit score is a bad credit score and can’t qualify you for credit.
Here are the four levels of credit score you can achieve:
- Bad (300 629)
- Fair (630-689)
- Good (690-719)
- Excellent (720-850)
Financial institutions would prefer candidates that have “Good” or “Excellent” credit scores.
Who Makes Credit Report?
A credit report is made by a company known as a credit reporting company. They collect your details and there are three big credit houses:
How to See Your Credit Report
If you want to, you can get a free copy of your credit report every year. That means one copy from each of the three companies that write your report about you.
- Firstly, Call Annual Credit Report at 1-877-322-8228 or
- Go to AnnualCreditReport.com
How to Get Credit
If you want to build your credit history, then you will need to pay bills that are put in a credit report and pay them on time.
Most times, utility companies put deatails into a credit report, thus if you have utility bills in your name, it can help you build credit.
Most credit cards also put details into credit reports. Thus you can get a store credit card that can help you in building credit. Secured credit cards can also help you in building credit.