Credit History

Your credit history, also known as a “credit report,” is a detailed summary of all your credit related activities. When a credit history check is performed, the resulting credit report contains all information about your debt history, including information about all accounts, both past and present, your payment habits, information about late payments, defaults and bankruptcy when it is applicable, and more.


When a consumer applies for a loan, whether it’s for revolving credit from a credit card company, secured debt for a home mortgage or a car loan, or any other type of credit, the lender will contact a credit bureau to perform a credit history check. You number of open accounts, history of past accounts, bill paying habits, negative factors such a late payments and more are all scrutinized by the lender to determine whether you are able to take on more debt and whether you are apt to make payments of the proper amount on a timely basis.

After analysing the data compiled by the credit history check, the lender will determine how much of a risk you are with regard to repaying a loan in a responsible manner. If your history of credit and bill paying indicates that the risk to the bank is low, you will likely receive the full amount of the loan you requested, and with favourable terms like lower interest rates and decreased fees, of no fees at all. However, if you are considered a risky applicant, especially if you have blemishes on your history like late or insufficient payments, bankruptcy, or judgments against you, you could be given a loan with higher rates or more fees. If you are considered just too much of a risk, the lender could turn you down completely.


In general, there are five factors that affect your credit score and are reflected in the credit history check’s report. These factors are your history of debt, your payment history, credit inquiries, the age of your past and present accounts, and the diversity of your accounts. The better you’re doing in each of the categories, the higher your chances are of receiving a loan with terms favourable to you.

Your debt history is one of the two most important factors in considering your overall credit health. The lender will analyse the lines of credit that you currently possess as well as the loans and revolving credit you have used in the past. The types of debt being considered are secured debt, unsecured debt and open debt.

Secured debt is also known as instalment debt. This is a type of debt with a defined end point and defined payment amounts, and has collateral associated with it. Home mortgages and auto loans are considered instalment debt. You are borrowing a specific amount for a period of time determined at the start of the loan when terms are negotiated. This loan pays for a particular item and payment amounts are also defined in the beginning. Many lenders see secured instalment debt as “good debt” since it is viewed as borrowing for something you need, such as a home, but can’t afford the funds up front and the debt is backed up by collateral.

Unsecured debt is also known as revolving credit. An example of this type of debt is your average credit card. The only terms defined in revolving credit are usually the interest rate and the maximum credit amount, but even these can change over the life of the account. There is no end date set and no specific item purchased. Borrowers can choose to pay the minimum or pay more, but the credit can be used any time for anything and there is no collateral involved. As such, most lenders consider revolving credit as “bad debt,” seen as using money you don’t have to buy something you don’t need. When considering unsecured debt when trying to determine your credit worthiness, as lender will compare your credit limit with your balance history. The larger the buying power gap is between your balance and your limit, the better your credit score will be in this area.

Open debt is a more rare type of debt. This is a debt that must be paid on time on a regular basis. Many credit card companies, like American Express, offer open debt type cards whose balances must be paid in full each month. While considered a form of revolving credit, open debt cards don’t have nearly the negative impact on credit score seen with typical sources of unsecured revolving debt.

Payment history is the most heavily weighted factor in considering an individual’s credit history. Payment history is recorded for each line of credit, both in the past and current. Lenders examine whether you paid on time and if you paid the minimum amount or more. In the payment history section, lenders will also be able to find any negative aspects of your credit history. They will be able to see whether you made late or insufficient payments, including how many. Also listed here will be bankruptcies, foreclosures, judgments, liens, repossessions, etc. The more negatives recorded here, the worse your credit rating will be. The worse your credit rating, the less likely you are to get more credit.

Number and frequency of credit inquiries can have an effect on your credit score. Whenever a company requests a credit history check, this is called a “credit inquiry” and is recorded by credit bureaus. Some inquiries have a negative effect on credit. The inquiries that do affect credit are those performed when you apply for a loan or a credit card. That is, these inquiries affect your score because they show that you are actively seeking credit. Other inquiries, such as those performed during an employment background check, insurance applications, or when you check your own credit, have no effect on your score.

Account age is the next factor that affects a borrower’s score and their ability to obtain credit. Also know to lenders as “time in file,” your account age is important because it displays your stability, or lack thereof, as a borrower. The age of your credit file in general, from your first line of credit to the present, is considered, as is the age of individual accounts. The older your report and average age of accounts, the better off you are.

The final factor in determine your credit score is diversity of accounts. Lenders will examine your lines of credit to see if you have various different types of accounts. Borrowers who have, for example, an auto loan, home loan and credit cards show lenders and ability to pay different types of debt. Borrowers with only credit cards can’t compete and will score lower in this category.

Your credit history check is one of the most important factors a lender considers when determine whether to give you a loan and what type of credit to extend to you. Considering the aspects of a credit report listed above that determine your overall credit score, how can you ensure a good score?

• Get more secured debt. Yes, this is a chicken and egg argument. “How can I get a good loan with no secured debt, and how can I get secured debt without a loan?” Simply put, your first secured debt loan ever will be a loss. Knowing this, don’t make a house your very first experience with instalment debt. Buy an inexpensive car with a less than favourable loan, make all payments on time, and you’ll be in much better shape next time.
• Have less unsecured debt. Don’t buy what you can’t afford unless it’s a necessity. Resist the urge to have multiple credit cards. Keep one card for emergencies and pay it off as soon as you can. Don’t go in over your head charging luxury items you don’t need. It’s a sure way to wreck your credit.
• Make your payment history perfect. Don’t ever pay under the minimum amount, and don’t ever pay late. If you’re not really buying what you can’t afford in the first place, as listed in the previous helpful hint, you should be good here.
• Don’t apply for a lot of loans and don’t do a lot of “card jumping.” Yes, consolidating credit cards and taking lower interest cards to transfer balances is a wonderful way to decrease debt, but all those inquiries and short histories hurt your credit score.
• Check your credit history regularly and file disputes when you need to. Lenders make mistakes. It’s easy when you consider the sheer number of transactions processed daily and the automation of the entire venture. Checks can be lost, funds can be applied to the wrong accounts, and delays can cause payments to be applied to accounts much later than they should be. By checking your credit report regularly, you can catch mistakes immediately, allowing you to dispute these issues and keep your record clean.