Your credit history is important as it impacts whether or not lenders will offer you loans, mortgages and credit cards – amongst other borrowing options. Whether you’re entirely new to the credit game or are a seasoned borrower, we explore seven essential things that you should know about your credit history!
A Credit Report Isn’t A Credit Score
A credit score is what lenders take into account when you apply for credit. It is calculated according to your credit rating (aka your credit history), which is influenced by how you’ve interacted with banks, lenders, and other associated factors in the past.
Five Main Factors Affect Your Credit Score
When it comes to being assessed, five main factors influence your credit score. Payment history, which links to whether you’ve repaid previous loans on time, is the primary factor which can lead to a poor rating. Following this, how you’ve utilised credit in the past, your average credit age, your range of accounts, and inquiries into lending money are the other core factors here.
Your Credit History May Cost You Thousands
Since it directly impacts a lender’s perception of you, your credit history could lead to additional charges if you maintain a consistently poor credit score. Banks and other lenders are less likely to loan you credit if you have a bad reputation for late repayments, and low-interest rates are generally only offered to those people with a good credit score.
Regularly Checking Your Credit Score Isn’t Detrimental To It
If you want to stay on top of the game and regularly check your score, this doesn’t have an adverse impact on it. The only time that a credit score check is damaging is through a hard inquiry: this consists of a lender assessing your credit to determine whether they will lend to you. The damage done is exceptionally minimal here, and is only temporary too. It does highlight that it’s best not to apply for multiple loans or credit cards simultaneously, though.
Context Helps Your Case
When it comes to borrowing money, your credit score is not only one factor taken into account by the lender. Every scenario is different, so if you’ve got a bad credit score, don’t despair. Instead, give the lender some context – explain why you have a bad credit score, how you plan to change this, and why you need to borrow more money. Then follow our tips to help you recover from bad credit.
Credit Ratings Have Other Uses
Aside from enabling you to check your reputation, your credit rating can also give you insights into any fraudulent activity going on in your name. For instance, if somebody opens up a credit card under your name, you can easily spot this information on your report. This helps to protect you from further damage as you can nip the problem in the bud.
Disclaimer: TheMoneyDaily’s service is not intended to be, nor should it be construed as financial advice. We help our readers make informed decisions and can introduce you to comparison services and provide impartial information and guides. Where appropriate, we may introduce FCA authorised partners who can provide services relating to financial products.
