Credit history - Definition and Overview

Credit history is a record of an individual's or company's past borrowing and repaying. It will list personal credit currently in the person's or company's name, and risk factors like late payments and bankruptcy. Credit card companies and other lenders look at a credit history to determine if a person or company is likely to repay on time, if not then they can be denied credit. However if a person does have a negative credit history, then a lender may still decides to issue them credit, but at a higher APR (Annual percentage rate).

How to improve your credit rating:

• Maintain a good payment record - Pay your bills on time, this is very important. A lot of late payments can lower a credit history record.

• Control of debt - Lenders want to see that you are not living beyond your means. Experts estimate that non-mortgage credit payments each month should not exceed more than 10 percent to 15 percent of your after tax income.

• Signs of responsibility and stability - Lenders perceive things such as longevity in your home and job (at least two years) as signs of stability. Having a respected profession can improve a credit rating

• Credit inquiries – Keeping credit enquiries to a minimum can help your credit rating as whenever you apply for a credit card, the lender accesses your credit rating from a credit rating agency as part of the approval process. When your credit rating is accessed, a note is made of this access on the record for two years. Credit companies perceive many inquiries on your report as a signal that you are looking for loans and will possibly consider you a poor credit risk. To keep your credit rating good, try not to let companies accessing your history unnecessarily.

• Get rid of the cards you don't use - Having credit cards that you do not use and have a zero balance on can hurt your credit. The rationale is that if you have a lot of available credit, you could run it up at any time (even if you never have). Ask the credit rating agencies to remove the discarded cards from your report, noting that you closed the account, and not the credit card firm.

See also

• Credit rating agency
• Credit card