What Are the Benefits of Good Credit History?

The time and effort spent to build a good credit history is worth the trouble. Any carelessness with debt management will be reflected on your credit report for lenders and employers to see for the next seven years. Having a good credit history will give you the security of knowing that you will never be turned down for a credit card or loan.

The Facts

Your credit history is a list that appears on your credit report. It details all of the creditors you have debts with. Each creditor is given a trade line on your report, which shows how long you have had the account and how timely your payments have been. The information in your credit history determines your credit score. A good credit history shows potential creditors that you can be trusted to make your payments.

Time Frame

When lenders review your credit history, they will not see a list of all the debts you have held. After seven years, an account will continue to appear on your report only if it is still active.

Interest Rates

When you apply for a credit card or loan, the lender will pull your credit report and review both your credit history and your overall score to determine what interest rate you are eligible for. A history of timely payments will make a lender much more willing to give you a low interest rate. Low interest rates save you money over time because you are being charged less on your loan or credit card purchases.

Employment

Many potential employers will pull your credit report when you apply for a job. By reviewing your credit history, they can see whether you are reliable in your agreements to pay your debts. In the eyes of an employer, if you are reliable with debt, you may demonstrate the same reliability on the job. If you are applying for a position in which you will be handling money, an employer will look at your credit history to determine whether you are carrying defaulted debts or are late on your payments to your creditors. Employees who are in need of extra money to pay debts are considered to be a theft risk and are much less likely to be hired. Your good credit history can be instrumental in helping you get the job you want.

Banking

Most banks will look at your credit history when you apply to open a checking account. A customer with a positive credit history is much less likely to incur fees. In the event that the customer does accrue fees, the bank feels secure that those fees will be paid promptly. A credit report that contains a history of defaulted debts shows a bank that the a person is irresponsible with money and a financial risk. When you apply to get financing through a bank or credit union, you are likely to be turned down if your credit history and credit score don't meet the bank's standards. Keeping a good credit history ensures that you can obtain financing for a home or car.