Financial Education



Credit History Report

How Does My Credit History Affect Me?

Today more than ever, lenders and other service providers, such as landlords, use your credit history to make decisions about whether to extend you new credit and services. Lenders review your credit history to determine whether they will offer you credit and at what interest rate.

Your credit history follows you and affects everything from the size of the loan you qualify for to the interest rates you receive. It's important to keep it in shape by actively managing it throughout the year.

Bad Credit Can Hurt You
If your payment history indicates that you did not pay loans back or make loan payments on time, future lenders may believe that you are not likely to pay back a new loan in a timely manner or that you are not likely to pay it back at all. Those lenders may deny you credit. Or, if your payment history is inconsistent, you may be charged a higher interest rate than if you had better credit.

If you are deep in debt and are applying for more credit, a lender may consider you to be over-extended and deny your application, believing you may not be able to handle additional payments based on the lender's evaluation of your income and existing obligations.

In the end, it comes down to whether lenders will loan you money and at what interest rate. Higher interest rates raise your monthly payments, making your overall repayment of loans more costly. If you are denied credit, you may not be able to purchase the things you want, when you want them.

Building a Strong Credit History
It may sound a bit like a catch-22 -- you need to have credit to get credit -- but there are some easy ways to start building a strong credit history:

Open a savings or checking account. Although this is not credit, it shows that you have money to repay credit.

Ask someone you know with good credit to co-sign a small loan that you will be able to immediately pay back to establish credit. Once you get the first payment bill for the loan, pay the loan back in total. You may need to repeat this process until you are able to obtain a loan without a co-signer.

Consider a financial institution that offers "secured credit cards." You deposit an amount of cash and then receive a credit card to charge up to a certain percentage of the cash in your account. Before opening this type of account, be sure you understand all of the costs.

Some local retailer or gasoline credit cards are easier to obtain since they do not carry monthly balances (revolving credit).