How Your Credit History Impacts Your Life

Your credit history impacts your life in several different ways; it can affect your ability to purchase a home, get a job, and even what you will pay for car insurance. Please read the information below in order to better familiarize yourself with what is included in your credit history, how it is used, and why improving or maintaing it is important.

What Is Included in My Credit History?

While payments to credit cards and mortgage payments are normally on your report, information about job history and even income at those jobs is also included in a credit history report. Additionally, information about student loans and the status of those loans as well as large medical bills that may have been reported to the credit reporting agency will be in your credit report. In many cases, banking history is also in the report, which can include returned checks, the number of open bank accounts, and what type of bank accounts they are – savings, checking, home equity line of credit, etc. Beyond reporting on your financial obligations and your payment history, there is also information about your credit application history, including how many applications for credit that you have applied for in the past.

How Is My Credit History Used?

Many companies and organizations use credit history as a gauge for determining interest rates, payment options, and overall credit-worthiness. When applying for loans, credit cards, insurance, and even a job, your credit score will be looked at in different ways, which is highlighted below.

Loans – Most people need a loan when they are purchasing a home or a car. Your credit score and rating is used to determine your ability to pay the monthly rate for the loan, making said payment on time, and overall fiscal responsibility as well as stability.

Credit Cards – If you apply for a credit card, your credit history and report will be used to determine the interest rate the company will offer you. Your credit history will show the credit card company if you can make payments, if those payments are on time, if you have a large amount of debt already, and if you have a handle on that debt. By determining how large of a risk you are to them, the companies will offer the appropriate rate to you.

Insurance – Similar to credit cards and loans, insurance companies will check your report for consistency and reliability. The company wants to know that you will be able to handle the monthly fee and pay into your policy for the term agreed upon. If the companies see that your history is overall poor and your score is low, they will offer you a policy with a higher rate as you are a greater financial risk to them.

Employment – Many employers have adopted the standard practice of running a credit history as part of their pre-employment process. Employers desire workers that are stable, trustworthy, and reliable when it comes to their fiscal responsibilities. If you have missed payments, large debts, and a low credit score, this could make you look like less of an asset and more of a risk to the company.

Why Should Improve or Maintain My Credit?

Your credit history should either be improved or maintained because it is considered a key piece of information that is used to make decisions about granting credit, insurance rates, and even employment offers. By keeping a watchful eye on your credit and improving it when necessary, you increase your chances in obtaining better rates, greater financial options, and more employment opportunities.

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