Your credit history is a detailed record of how you’ve borrowed and repaid money over time. It plays a major role in determining not just whether you’re approved for credit, but how much it will cost you.
Learn more about how credit history works and how it can impact your financial opportunities.
Your credit history is a record of how you’ve managed debt over time, including credit cards and loans.
Your full credit history can be found in your credit reports. For each debt shown in your reports, you’ll find the following information:
Date of account opening
Status of account (e.g., opened, paid and closed, or charged off)
Whether you made your payment each month
Account balance
Over the years, I’ve heard many people claim that their credit history includes negative information from decades ago. But this is actually a common credit myth. The truth is that most negative information has to be removed from your credit reports after seven years. One exception, however, is Chapter 7 bankruptcy, which stays on your credit reports for 10 years.
The information in your credit reports is used to calculate your credit scores. You can think of your credit reports like a report card and your credit scores like your grade: The more positive information you have in your reports, the higher your scores will be.
So, having a long credit history detailed on your reports is important because it positively impacts your credit scores. In fact, it’s one of five factors used in credit score calculations, accounting for 15% of your scores.
Here are a few key facts to keep in mind if you’re hoping to improve your credit when it comes to your length of credit history:
The longer your credit history, the higher your credit scores can be.
Opening new debt accounts can shorten your average length of credit history and cause your credit scores to drop for the short term.
Your credit scores consider the average age of all your debt accounts and the age of your oldest account.
You have to have at least one debt account open for a minimum of six months before your first credit score can be generated.
People with the highest credit scores (800 and up) have an average length of credit history of 10.5 years.
If you have no credit history, you’ll eventually face some financial challenges. For example, you won’t typically qualify for loans unless you go to predatory lenders. In some cases, you might qualify for loans from reputable lenders if you apply with a cosigner.
You’ll also be turned down for credit cards, and you may have difficulties getting approved for certain jobs and rental apartments.
Read more: How long does it take to build credit from scratch?
If you have no credit or bad credit, know that it doesn’t have to stay that way forever. Consider these steps to start establishing good credit history:
If you have a loved one with good credit, ask them to add you to one or more of their credit cards as an authorized user. When they do this, their account information will appear on your credit reports, and it will be used to calculate your credit scores.
Search for a credit union or bank that offers secured credit cards. A secured credit card is a card you can qualify for even if you have no credit. But you’ll have to make a deposit in order to be approved.
When you eventually open a regular, unsecured card, make sure it’s a card you plan to have open for the long term so it can help you build a long credit history.
Additionally, only make charges you can afford to pay off within a month. By paying off your balance in full each due date, you’ll avoid getting stuck in a debt trap, and you’ll improve your credit scores in the area of credit utilization.
You can see your full credit history by pulling your credit reports from AnnualCreditReport.com. This site allows you to access your reports from the three major credit bureaus — Experian, Equifax, and TransUnion — for free once a week.
Are credit history and credit score the same thing?
Credit history and credit scores are not the same thing. Your credit history, which is found in your credit reports, is all of the information about the debt you’ve had within the last seven to 10 years. A credit score is a three-digit number that reflects the information in your credit reports.
Your credit history, as recorded in your credit reports, includes detailed information about your debt accounts. This includes any credit cards, loans, and collection accounts you’ve had within the last seven to 10 years.
