Three Top Factors That Affect Your Credit History | Kathryn Smith
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Three Top Factors That Affect Your Credit History

Unlike your credit score, which is just a three-digit number calculated by an algorithm, your credit history is a more in-depth look at what credit accounts you've had over the years and how responsibly you used and paid back the money.

Here are three factors that have a big impact on your credit history.

1. Your Lending Accounts

The number, age, and variety of your lending accounts is one of the biggest things where your credit history is concerned. When you order a free credit report from one of the big credit bureaus, you'll find information about each account that reports to the bureaus.

Credit cards (secured and unsecured), as well as mortgages and loans such as student and personal loans, are the main types of accounts you can expect to find on the credit report. A checking account at your bank or a loan from a family member are types of accounts and loans that won't show up. 

Because this is such an important factor, you may be in a bit of a pinch if you don't have any accounts reported to the bureau. This could happen because:

  • You're young and just starting out, and only recently looking into credit cards
  • You were raised by parents who prided themselves on avoiding debt
  • You've lived outside of the US for most of your life
  • You've always lived within your means and never bothered to build credit history

This can seem like a catch-22, especially if your applications get denied and start showing up on your record. You may be able to get around this by using a secured credit card for a year or two to show that you can handle your money responsibly. 

2. Negative Items on Record

While lenders will want to see a diversity in the accounts on your record, they don't want to see negative items. These dings, which can both drive your credit score number down and scare prospective lenders away, can include:

  • Any accounts that have gone to collection
  • Delinquent accounts (such as missed student loan payments or credit card bills)
  • A foreclosure on your mortgage
  • Any bankruptcies you may have experienced

You can look for these items on your credit report. Just one late payment may not scare off lenders, but multiple negative items in your history can demonstrate a trend that will make your credit applications much less acceptable.

If you find one or more of these on your record, the first step should be to find out why. Do you actually owe money on that account still? If so, try paying it off. If not, and the information is inaccurate, contact the credit bureau directly.

3. On-Time Payments

All the payments you've made over the years and all the accounts you've kept in good standing matter. It's not just late payments that affect your credit history. Your on-time payments can help by casting you in a positive light.

For example, if you've only had your first credit card for a couple of months and you're already a month behind, a potential lender might look at you askance. But if you've made on-time payments across all your accounts for the past ten or twenty years, one or two late payments spread out over a decade aren't going to turn you into an undesirable borrower.

This is why it's so important to focus on having just the number of accounts you can reliably handle and on keeping up with the payments every single month.

These three factors are some of the most important ones for your credit history. If you're thinking of buying a home, you'll need to check your credit report to make sure your credit history is on point. When you're ready, get in touch with Equity Prime Mortgage LLC today.