Do Your Past Credit Scores Affect You?

Business person climb better credit scoreWhen you decide it’s time to make a big-ticket purchase, you may not have the full purchase price sitting in your bank account. This means you’ll have to apply for a loan. As you talk to a credit manager at your bank or credit union, she’ll pull a credit report, which she uses to make a decision on extending a loan to you. What’s on that credit history affects your ability to get that loan.

Credit Score Versus Credit History

People frequently confuse “credit score” with “credit history.” Think of the last time you actually saw a numbered score when you requested your free, annual credit reports – you didn’t. Sure, you can get that, but you’ll pay for that number.

When you request your annual credit reports, what you get gives you a comprehensive picture of your credit history over time – beginning from the first time you applied for, and received credit. Your credit report tells creditors how responsibly – or irresponsibly – you have handled credit in the past. Generally, the Big Three credit bureaus are required to remove derogatory credit information 7 to 10 years after it was first placed there. The good credit information can stay on your report for as long as the credit bureaus choose to keep it in. Of course, the longer that good information stays there, the better it is for you.

What’s Here Today

Your credit score is a dynamic number. That is, it changes, probably on a daily basis, depending on what is reported to the credit bureaus. Therefore, if you visit your credit union or bank to apply for a mortgage loan today, what the credit manager pulls will be different from what another credit manager pulled a few weeks ago. The number that gets pulled in 4 or 6 weeks will be different from what’s pulled today.

Depending on where that number happens to be sitting, it could be good or bad news for your plans to buy a house. If your current creditors file good information about your current payment habits, the news will be good; if you haven’t been paying your car payment or credit card bills in a timely manner, the news won’t be good.

Credit History is More Important

Because your credit score changes so often, credit bureaus and lenders rely more on your credit history. This stays more stable because it provides a long-term snapshot of your borrowing and repayment habits.

If you’re thinking back to that credit card you got when you first set foot on a college campus several years back, your behavior with that piece of plastic is probably still sticking around like gum on your sneaker. If you whipped it out every Friday night to buy pizza and a few 12-packs – then you cringed at the amount due on the bill and stuck it under your texts, hoping it would magically disappear, then it’s haunting you. Conversely, if you rose to the occasion and made, at the least, the minimum monthly payments, your early credit history might be helping you now.

Effect of a Bad Credit Report

A bad credit history can and will frustrate you in your attempts to get credit now, especially if you’re now more responsible in paying your monthly obligations. Let’s look at some of these ways:

  • No car loan – you’ll either get socked with a high interest rate or be denied altogether;
  • Insurance companies might stick you with higher monthly premiums;
  • You’ll be turned down for jobs in particular industries;
  • Apartment managers can refuse to rent to you;
  • Utility companies will require security deposits;
  • Harassing calls from creditors and debt collectors;
  • You’ll be turned down for a business loan;
  • You’ll be denied for loans and credit cards;
  • Forget about that iPhone – providers check your credit history;
  • You could lose out on that mortgage for the house of your dreams.

“But that was all so long ago! I’m responsible now!” This might be true, but those who extend credit are unforgiving. Your past will definitely come to the present, hanging over your head, regardless of your current credit behavior.

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