You must have heard about credit history somewhere in college if you just starting out or if you are already working, you must know a fair bit about it and how it can affect you. We shall discuss what credit history is all about and then bring out the various ways in which it can influence or affect your daily life.
Your credit history is a record of all your major financial transactions which will give an indication of your financial credibility or stability. This record is maintained by independent non governmental institutions called credit bureaus in the form of a score and which give out your credit history to institutions that seek it for a price. Based on whatever your credit history says, that institution can take the decision of whether or not it wants to be associated with you and in what capacity.
The credit history can be affected by a number of factors. Not paying up on a loan will have a very bad affect on your credit history. You will be marked as a defaulter by the bank in addition to this. Another instance could be not paying an installment on your insurance policy. In such cases your credit score will go down and at the same time, your driver`s license can be revoked if you are caught by a cop. Even breaking the contract on your mobile phone connection can adversely impact your credit score.
Other lesser actions that can affect your credit history include extensively borrowing from just one credit account, taking too many loans or mortgages on your assets, closing old crediting accounts. The rule of thumb while using your credit card must be to use not more than thirty percent of the credit limit. Anything over this and you can be branded as a compulsive borrower. The idea is to make the bank believe that you are using your credit card not for necessity but as a convenience.
Having a bad credit history or no credit history itself can be very problematic. We discussed how one can have a bad credit history, but having no credit history is equally disturbing. This can happen if you are from a different country, or if you have just started working, it can also be the case if you have been out of the country for a long period of time. In such cases, it can be difficult to even open a new crediting account.
The banks will in all probability ask you to open a savings account in their branch in order to have collateral against all that you would be borrowing using your credit card. It can also be difficult explaining your case to potential employers since your social security number would be linked to your credit score and history. It can also be very difficult to get loans and mortgages in order to buy vehicles or land. It can be extremely frustrating for businessmen who depend on loans for all their new ventures and hence it is necessary to pay attention to ones credit history and ensure that it is in good shape.