A credit history is a record of a consumer’s payment and borrowing activities with their creditors. Essentially, it is a consumer's credit reputation. The activities covered in a credit history or credit report include, but are not limited to, a consumer’s payment patterns, borrowing patterns, and credit balances, as well as credit inquiries by potential creditors.
A consumer’s credit rating or credit score is based on the information compiled in their credit history. There are three major bureaus which compile credit information: Equifax, Experian, and TransUnion. Most creditors submit consumer credit information to these bureaus on a periodic basis, generally every three months at minimum.
To protect credit, it is often recommended that consumers check their credit regularly. In the US, consumers are allotted one free credit report per year. Ordering and reviewing one's credit report will help confirm that balances, open credit cards, and other relevant information are accurately reflected in one's credit history. If any information is incorrect, one can dispute it with the creditor.
To dispute or clarify information in your credit report, a consumer may submit a written statement which becomes part of their credit history. This is especially important with the increase in identity theft. If a consumer's identity were to be stolen this personal statement may help a creditor make an informed decision about the consumer's credit worthiness.
Having a favorable credit history is directly related to having a favorable credit rating. Consumers with good credit will potentially be offered better interest rates and other incentives since the creditors are able to see their favorable payment and/or borrowing patterns. Credit obligations should be taken seriously and handled with extreme care and consideration so that credit ratings remain favorable. Late payments, maintaining large balances on credit cards, and making minimum payments, will also be reflected on a consumer's credit history.
Consumers that have difficulty meeting their credit obligations should contact their creditors immediately so that payment arrangements can be made. Being in a payment program will become a part one's credit report but it will also show that the consumer is responsible enough to recognize that such arrangements were required. It's a better option than making late payments or not making payments at all.
The historical record of a consumer's credit will have a lasting impact on his or her ability to make large purchases. In addition, one's credit information will influence your ability to secure such things as home utilities and cellular telephone services. Since credit history affects the future of one's credit rating, one must carefully protect his or her credit reputation.
