Know Your Credit History


Know Your Credit History

Think of your credit history as your borrowing "resume" or "track record."

If a stranger came up to you and asked, "Can I borrow $500? I promise I'll pay you back," you probably would be pretty reluctant to lend them money. Yet every day, banks and other creditors face similar situations: People they have never met before 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 histories - the records that show whether they have repaid previous debts on time.

Whenever you apply for a credit card, car loan, cell phone contract, or mortgage, the credit issuer calls a credit bureau to check your information. If you do not yet have a credit history, the bureau 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 file for years, and it's what creditors look at to decide whether or not to do business with you.

Your past borrowing, spending, and payment habits will determine whether a bank or other creditor is willing to lend you money and at what interest rate for a car, a house, or other purchase.

Creditors and credit bureaus know your credit history. You should too. It is information that helps shape your financial future.