What’s the story on your credit history?
The short answer is lenders want to see your track record with credit. And it’s a good way for you to see your progress (and pat yourself on the back).
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What is credit history? A guide to its importance and impact
Updated September 20, 2024
This date may not reflect recent changes in individual terms.
Written by: Erin Dunn
Your credit history is a record of your borrowing and repayment activity. For instance, it may include information about how many credit cards or loans you have and whether you’ve paid your bills on time or not. You can find details about your credit history in your credit reports.
Let’s review what you need to know about your credit history, and how a deeper understanding of the way credit history works can help you in your journey to build credit.
What is credit history?
Your credit history is essentially a record of how you’ve used credit. This record plays a major role in determining your credit scores and is used by lenders to get a sense of the way you’ve handled your money and credit obligations over time. Depending on how you’ve used credit in the past, your credit history may include …
- The number of credit cards and loans you have
- The number of payments you’ve made on time or late
- How long you’ve had open credit accounts and whether they’re in good standing
Lenders may use the credit history information found in your credit reports to decide if they’ll approve you for a financial product, such as a loan or credit card account. And depending on your state, potential employers, insurance companies and rental property owners may also look at your credit reports, so it’s important to understand what information your reports include and how it’s presented.
Why is credit history important?
As you may have already noticed, your credit history information accounts for most of the above factors that influence your credit scores. So, your credit history can ultimately affect whether a lender approves you for a credit card or loan — as well as the interest rates and terms you’re offered.
Making payments on time and keeping your credit utilization low contribute to a healthy credit history and can help you qualify for competitive rates. On the other hand, a credit history with late payments or other derogatory marks can make it harder to get approved for credit or to receive favorable rates or terms.
What’s in your credit reports?
Your credit reports essentially break down into two main components: Your personal information and a record of your credit history. Personal information can include your name, address and Social Security number. Your credit history, as noted above, includes information about how you use and manage credit.
Here’s a rundown of the major credit history aspects to look out for on your credit reports.
- Credit account information — For each of your credit accounts, your credit reports may include information about your payment history, your loan amount or credit limit, your current account balance, and the age of the account.
- Credit inquiries — There are two types of credit inquiries that might show up on your credit reports:
Hard inquiries (also known as “hard pulls” or “hard credit checks”) typically occur when you apply for credit, and they can negatively affect your credit scores. Soft inquiries (also known as “soft pulls” or “soft credit checks”) can occur when you check your own credit, and they don’t affect your credit scores. Soft inquiries may or may not end up on your reports. - Public records — These may include derogatory marks on your credit reports, such as accounts in collections, late payments and bankruptcies. These types of public records can cause significant long-term damage to your credit scores.
There are three main consumer credit bureaus that generate credit reports: Equifax, Experian and TransUnion. Lenders and creditors can choose to report account information to any of these three credit bureaus, which is how that information makes its way into your credit reports.
While your credit reports from the three major consumer credit bureaus likely contain similar information, they may not be exactly the same. All of your credit information may not be reported to all three bureaus, or it may be reported at different times. Keep in mind that credit bureaus can also display the same information in different ways.
If you’re curious about what’s in your credit reports, you can check them for free. Credit Karma offers free credit reports from Equifax and TransUnion. And you can also request a free copy of your credit report from each of the major credit bureaus every 12 months at annualcreditreport.com.
Good credit history vs. bad credit history
When evaluating whether to extend credit or offer you a loan, lenders will consider aspects of your credit history such as payment history, recent inquiries and credit utilization.
Having a good credit history typically means that you pay your bills on time. Other factors that contribute to a positive credit history include using less than 30% of your total available credit, having a mix of open credit types and having few recent credit application inquiries. A bad credit history can indicate that you’ve fallen behind in your payments, have a bankruptcy on your record, use most or all of your available credit, or have other factors contributing to a negative record.
Lenders are more likely to approve your application — and offer you lower interest rates — if you have a good credit history.
Credit history FAQ
No. While a credit card can help you establish credit history, other types of accounts — such as student loans, credit-builder loans or services that report your rent payments to the credit bureaus — can help you build credit.
Though there are different credit-scoring models, they typically account for similar information when calculating your credit scores. The elements that generally factor into your credit scores are your payment history, the percentage of your available credit that you’re using, your credit mix and age, your total balances and debt, your recent credit behavior and inquiries, and your available credit.
There are a few different steps you can take to start building credit: Applying for a secured credit card or credit-builder loan are two common options that you can do by yourself. Or if you have a close relative or friend with established credit, you could ask to become an authorized user on their credit card — or ask them to co-sign a loan with you.
Yes! Credit Karma offers free access to your credit reports and VantageScore 3.0 credit scores from Equifax and TransUnion. We’ll also show you items in your credit history that could be impacting your scores, and help you monitor your credit for signs of errors or inconsistencies. Your scores and reports can be updated weekly, so you can track how your credit history changes and impacts your scores over time.