Why Your Credit History Matters Now

By George Stargell, Senior Editor

Just because your credit history report shows a few signs of weakness way back when is no reason for you to be denied credit at a reasonable rate.  Right?  This is America, after all, land of the free, home of the brave, and host to second chances and fresh starts, whether or not you have a good credit history.

Right?

Wrong. Unfortunately for anyone who doesn't have a good credit history, the credit industry relies very strongly on credit history reports to determine whether someone is a good bet or a bad risk to repay the loan or revolving line of credit they're seeking.

Commonly, lenders and creditors use FICO^® scores from the three credit bureaus to help make their decisions. Although recent credit history is weighted more heavily than older actions, those credit scores take into account each applicant's financial history over the past seven to ten years.

A good credit history can lead to more favorable interest rates on credit cards, mortgages, and other lines of credit. A bad credit history won't be so kind:

• If you skipped out on a loan six years ago, that'll be in your personal credit report, and it won't help your credit score.
• If you were late on payments to a utility company three years ago, that too will be in your credit history report, and again, it won't work in your favor.
• If you declared bankruptcy, that can stay in your credit history for up to ten years and, unless you've made great leaps forward financially, will hurt your chances of getting a low interest rate.
• Even if you simply have a lot of credit cards and, with them, a lot of credit inquiries, that history will appear in your credit report and could cause lenders to wonder whether you're overextended and therefore a higher risk.

Fortunately, you're in control of your credit history. If you don't have a good credit history, you can take steps to improve it over time.