Your credit history is a record of your credit accounts. The three major credit bureaus (TransUnion, Equifax and Experian) each store detailed records of your accounts and payment history.This information becomes especially important when you apply for new credit cards, loans and mortgages.
How do credit bureaus use your credit history?
Credit histories are useful because they show lenders how reliable you are with financial responsibilities. Credit bureaus may use your credit history to calculate your credit score, which is a snapshot numerical estimation of how likely you are to pay off debt in the future. Lenders typically use your credit score and credit history to try to assess your creditworthiness, so they can decide whether to approve you for credit or how to set their lending rates.
Establishing a healthy credit history can help in many situations. A higher credit score can result in lower mortgage rates, a lower APR for your credit cards, lower insurance premiums and better rewards on credit cards.
What kind of information is in your credit history?
1. Credit accounts. Your credit cards, loans and mortgages can all be on your credit history. You can also find additional details like the date the account was issued, the amounts owed, the credit limit for credit cards and payment history.
2. Inquiries. Any time you apply for a new line of credit, the lender will usually check your credit history, initiating a "hard inquiry" on your report. Hard inquiries could deduct a few points from your credit score and negatively impact your credit history for up to two years before being removed, though the impact generally decreases over time.
3. Derogatory marks. If you become severely delinquent in your payments and your account is sent to a collections agency, the account in collections will often be noted on your credit history, which can significantly lower your score. In fact, derogatory marks typically stay on your credit history for seven to ten years.
4. On-time payment history. If you are 30, 60 or 90 days late on a payment, it will usually be noted on your credit history and could negatively affect your score. The later the payments are and the more late payments that show up on your credit history, the more negatively they can impact your score.
What kind of information is not in your credit history?
1. Bank accounts, such as checking and savings accounts, do not typically involve credit, so in most cases, they do not have an effect on your credit history.
2. Your income, age and race will not appear on your credit history. Date of birth may appear as part of your identifying information, but it is not used in credit scoring.
What should you do if your credit history is incorrect?
An up-to-date and accurate credit history is very important in ensuring you have the best credit score possible. If you're concerned that your credit history is inaccurate, read this detailed guide on how to dispute an error on your credit report. Please keep in mind that the scores and credit information you see on Credit Karma come directly from TransUnion and Equifax, respectively. If your credit information that you see on Credit Karma is incorrect, please contact those credit bureaus directly.
A change in your credit score indicates a change in your credit history. Monitor your full TransUnion and Equifax credit reports on Credit Karma so you'll understand your report details, and if you need to take any actions to correct your credit history.
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