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Credit history is a report that documents anything related to how an individual managed his or her credit. It includes information on borrowing and repayment of credit cards, bank and car loans, mortgages and any other debt owed to a creditor. An individual's credit history will not only include open accounts, but includes any credit card accounts and loans applied for or closed. It lists late payments, defaults on loans and bankruptcy.
A person's credit score is determined in part by his or her credit history. Things on it that are considered negative include bankruptcy, late payments, high credit card balances and defaulting on a loan or credit card account. These negative marks contribute to a lower credit score.
A good credit history is important for a number of reasons. Credit card companies along with banks and mortgage companies want to provide loans and credit to people who are considered a good risk. This means people who will payback the money. If a person has a poor history with credit, and likely a low credit score, he or she may be considered a high risk and have a difficult time obtaining credit, including loans. If credit is obtained, it may be at a higher interest rate than someone with a good history.
An individual's credit history is recorded on a credit report. There are three major credit reporting companies: Equifax, TransUnion and Experian. Each company obtains its information from the credit card companies and banks. People should keep in mind that certain things, such as a bankruptcy, may not remain on the credit report forever. Consumers should determine the length of time negative marks are allowed to remain on a credit report and contact companies to ensure they were removed.
One step that people can take to improve their credit score is to get a copy of their credit report and review their credit history. Mistakes can be removed from it by writing to the reporting company. Paying bills on time, staying under credit limits and learning from past mistakes are also steps a consumer can take to maintain good credit.