Factors Affecting Credit History

Knowing the factors affecting your credit history can help you make wise credit decisions and achieve a higher credit score. Your credit history affects your ability to get loans. In some cases, poor credit history can hurt your ability to land a job. Explore ways to improve your history and achieve the best credit rating possible.

Payments to Creditors

An individual's payment pattern is a top factor affecting credit history. In fact, this one factor makes up 35 percent of credit scoring, and frequently paying credit cards and other loans late or missing these payments can destroy your credit history. Future lenders reviewing credit reports will take note of a poor payment history and possibly deny loan and credit applications.

Debts and Balances

Credit history is also influenced by the amount of outstanding debt carried by consumers. Owing money to creditors doesn't harm credit in itself. However, carrying large balances on credit cards (more than 30 percent of the credit limit) and maxing out accounts can take points off personal scores. When applying for future lines of credit, owing a lot of consumer debt can reduce purchasing power and lower approval odds.

Length of Credit

It's imperative to keep older credit card accounts opened to keep a long, active credit history. Some consumers close or cancel credit card accounts to help manage their debt and control excessive spending. While this method does alleviate the temptation to acquire debt, canceling accounts can also shave years off the length of credit history and reduce personal ratings. Maintaining a good credit history involves keeping a high credit rating, and keeping older accounts open helps achieve this goal.

New Accounts

Recently opened accounts and credit checks or inquires also affect credit history. Occasionally applying for a new line of credit or submitting a credit application doesn't harm your credit history. But if you frequently apply for credit, this results in excess inquiries on your credit file, and this decision can lower your score and negatively impact your credit history.

Credit Types

Having various types of credit accounts can influence your credit by 10 percent. For this reason, it's practical to include a mixture of accounts on your credit file. You might carry one or two credit cards, and then apply for an auto loan or installment loan.