What Is Credit History?

Your credit history is report on your repayment of debts and demonstrated responsibility in repaying them. It is recorded in your credit report, which details the number and types of your credit accounts, how long each account has been open, amounts owed, the amount of available credit used, whether bills are paid on time, and the number of recent credit inquiries. Your credit report also contains information regarding whether you have any bankruptcies, liens, collections, or judgments. 

All consumers are guaranteed access to their credit history (via a credit report) and are eligible for one free credit report from each credit bureau each year from .

Why Credit History Is Important

Potential creditors—such as mortgage lenders and credit card companies—review and use the information in your credit history to decide whether to extend credit to you.

The information in your credit history also is used to calculate your credit scores, including the commonly used FICO score. When creditors review your credit history, they assess several different factors: recent activity, the length of time that credit accounts have been open and active, and the patterns and regularity of repayment over longer periods of time. Your credit utilization ration and mix of credit also factor into your credit score.

Good Credit History

Having a good credit history means you have paid your bills on time and you are not carrying large amounts of debt. It means you are a lower-risk borrower. When you have a good credit history, it's easier to get approved for loans and for lower interest rates.

The best way to maintain a good credit report is to pay all of your bills in full every month. You should have no more than three or four credit cards, keep their balances low, have them for a long period of time, and never use more than 30% of your available credit. Also, regularly check your credit reports and be aggressive about correcting any errors that you find in them.

Bad Credit History

Conversely, those with a bad credit history do not pay their bills on time and maintain a good deal of outstanding debt.

Factors that contribute to a bad credit history include: late or missed payments, excessive credit card usage, applying for a lot of credit in a short window of time, and suffering major financial events such as bankruptcy, foreclosure, repossession, charge-offs, and settled accounts.

Bad credit can lead to difficulty in getting loans and credit cards, low credit limits with high interest rates, paying security deposits for things such as cell phones or apartment and car rentals, and being saddled with higher car insurance premiums.

You can repair a bad credit history but it will take time. You should regularly check your credit score to see which negative factors are the most important. In addition, you should pay your bills on time, reduce your credit card debt, and only apply for new credit sparingly.

No Credit History

Potential borrowers who have no credit history—for example, college-age young adults—may have difficulty being approved for substantial financing or leases. Landlords might decide not to rent an apartment to an applicant who has no credit history that demonstrates their ability to make payments on time.

You can establish a credit history in several ways, including taking out a small personal loan or applying for a credit card with a small available balance. Such usage lets you demonstrate how well you can manage your credit on a limited scale before taking on larger amounts of debt.

You also can open a joint credit card with someone with a good credit history, or open a secured credit card, which is backed by an amount of money that you put in a savings account.

Special Considerations

It is possible to get a bad credit history wiped clean if you have paid off all your debts and do not take out a loan, credit card, or other form of financing for a number of years. This interval can be seven or 10 years. Even borrowers who had an extensive prior credit history could effectively start over if such long gaps occur.

For a potentially quicker solution, as long as you’re willing to pay a fee, you could employ a credit repair company to possibly have negative marks on your credit report removed.

The Bottom Line

Understanding your credit history is critical to understanding your financial health. A good credit history can open opportunities such as increasing your chances of getting approved for loans and approved for better interest rates. When you know what goes into your credit history, you can develop a strategy to ensure you have a strong credit report for lenders.