Your Credit History

Your credit history. Three simple words that can determine the outcome of our financial success. Your credit history influences any and all decisions that a company or institution will make when considering you as a credit risk. Because of its importance, knowing and understanding what your credit report says about you is vital.

Your Credit Report

Your credit report is a document that will show your personal and financial information, good and bad.  Your score is based on this information and is called your FICO score.  The higher the FICO score the better.  This information is reported by all three major credit bureaus, Equifax, Experian (formerly TRW), and TransUnion.  Any time you apply for credit of any kind, the lender will contact one of these credit bureaus to obtain a copy of your credit report.

This all sounds pretty technical but what it boils down to is this, your credit score will influence all future financial decisions.  That is why it is so vitally important that you keep track of your score and read your report regularly.  Mistakes can and have been made.  Keeping track of your report will help you to find these mistakes and resolve them in a timely manner.

What Your Score Means For You

Pretty much everything.  As I mentioned above, your credit score will influence the decisions that companies make when you apply for credit.  If your credit is less than perfect, you may be turned down or at least given a higher interest rate than someone who has a higher score.  Problems can stay on your report for as long as two years even after they have been resolved.

What Influences Your Score

Your payment history is one of the main influences.  Have you paid your bills on time?  If you have routinely been late with payments, your score will be negatively affected.

How much outstanding debt you have is also a factor.  This includes the outstanding balance on any loans you may have as well as the credit limits on any credit cards you may have.  If you have multiple credit cards and these cards all have high credit limits, even if you don't carry a balance on these cards, the possibility still exists that you will someday charge all these cards to their limits.  This possibility alone will negatively affect your credit score.

The length of your credit history is also a factor.  Surprisingly, no credit history can work against you.  With nothing to go on, the company has no idea as to just how you will handle your credit.

Obtaining Your Report

Since January of 2004, all credit bureaus are required to give you one copy of your credit report for free each year.  Although the credit report is free, they can charge you for your FICO score.  Contact any of the major credit bureaus either online or by phone and see what their policy is.