What is Credit History?
Credit history is a record of your past repaid debts and a measure of your repayment schedules that you have done in the past. Your credit report provides information about the number and types of credit accounts you have, how long they’ve been open, the amounts owed, the amount of available credit used, whether you’re on time with your payments, and the number of recent credit inquiries. Your credit report also shows whether you have any bankruptcies, liens, collections, or judgments on your record.
How do you determine Credit History?
Credit history models examine one of your consumer credit reports and calculate a score (typically ranging from 300 to 850) based on complicated computations. Your credit history can be determined on the basis of the following aspects:
1. Payment History
The most significant component in evaluating your credit score is your payment history. This is because it shows your credit report. The scoring models in this category take into account:
- One time payment
- Late payment
- Public records
2. Amounts Owned
When it comes to assessing credit ratings, the amount owed, or your credit usage, is second only to payment history in importance. This category includes, among other things, how much you owe on loans and how many of your accounts have outstanding balances. However, your credit usage ratio is the most important factor to examine in this category.
What are the types of Credit History?
Simply, there are three types of credit history including:
- One of the most common forms of credit is Revolving credit, that is, a line of credit you can borrow from at any time. However, there is a limit to how much you can borrow and use at any given time, known as a credit limit. HELOCs (home equity lines of credit) are common examples of credit cards. If you have a balance, it usually needs monthly payments and interest costs.
- Installment credit is a sort of loan with a fixed amount of money and a periodic repayment schedule. In addition to school loans, mortgages, auto loans, and personal loans, it covers a wide range of loans. It’s quite a popular form of credit as well.
- Due to its rarity, it is common to not see open credit on a credit report. Open credit accounts (such as a credit card) allow you to borrow up to a particular amount but require you to pay it back in full each month. Charge cards, as opposed to credit cards used for revolving credit, are typically associated with open credit.
What affects your Credit History?
There are four factors that can affect your credit history including:
35 percent of your FICO score is determined by your payment history.
Your credit score is established in part by the amount you owe, which accounts for 30% of your total score.
Your credit score is determined in part by the length of your credit history, which accounts for 15% of your total score.
A credit combination in use accounts for 10% of your credit score.
New credit accounts for 10% of your FICO score.
Does Credit History affect FHA loans?
However, if your credit score is below 580, you aren’t always eligible for a personal FHA loan. Applicants with poorer credit ratings will be required to put down a 10% down payment in order to be considered for a loan.
When it comes to validating your ability to afford a home loan, FHA lending laws give lenders explicit guidance.