Think of your credit history as your borrowing “resume” or “track record”.
Credit History
If a stranger came up to you and asked if they could borrow $1000 and promised to pay you back what would you say? Before making a decision you would want to know their past credit history.
Yet every day, banks and other creditors face similar situations. People they have never dealt with before ask to borrow money through loans, credit cards, and other forms of credit.
Since they don’t know most of these people, they must rely on the prospective borrowers’ credit history. This is the records that show whether they have repaid previous debts on time.
How Do Your Get a Credit History?
Whenever you apply for a credit card, car loan, mobile phone contract, or mortgage, the credit provider calls a credit reporting agency to check your credit record. If you do not yet have a credit history, the credit reporting agency starts a file for you.
That file grows each time you use or apply for any type of credit. This information stays in your credit history file for years. It is one of the things credit providers may look at to decide whether or not to do business with you.
Your past borrowing, spending, and payment habits may determine whether a bank or other credit provider is willing to lend you money. It can also determine at what interest rate for a car, a house, or other purchase you charged.
Credit providers and credit reporting agencies know your credit history. You should too. It is information that helps shape your financial future.