Feb 06, 2024

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Your credit history is the primary source of information for lenders about your financial past and present. Some people have a long credit history. Others have a short credit history. And some people have no credit history at all.

As the name implies, your credit history tells the story of how you’ve managed your money. This history typically includes loans you have had and how you have handled them. The information can come from various sources, including banks, other lenders, government programs, and collection agencies.

Your credit history is contained in your credit reports, which are used to calculate your credit score. Potential lenders look at your score when making decisions about loan approvals and interest rates.

Knowing your own credit history gives you valuable information before you seek a loan. Because of this, it is in your best interest to understand your credit history and how it may affect your financial goals.

What is credit history?

Credit history is a record of your borrowing and financial activity over time. It is contained in your credit reports, which are compiled by three main credit bureaus: Experian®, Equifax®, and TransUnion®.

Some (but not all) of the many questions answered in your credit history include:

  • How many loans do you have?
  • How many credit cards do you have?
  • How much do you owe on your loans?
  • How many loans have you paid off?
  • Do you pay your bills on time?

Why is credit history important?

Credit reports containing your credit history are used by credit rating agencies, such as FICO*, to create your credit score. Potential lenders use this score to decide whether to offer you a loan and what interest rate to charge.

Where do you find your credit history?

Your credit history is recorded in your credit reports. You can request a free copy of all three of your credit reports annually from annualcreditreport.com. After you receive your free copies, you can still request additional credit reports, but for a fee. Checking your own credit reports will not impact your credit score.

How do you build credit history?

Your credit history is developed over time as a record of your financial activity. Simply put, lenders and other companies collect information regarding your accounts and provide this to the credit bureaus.

The credit bureaus create a profile for you, including your personal information, credit accounts you have had, your payment history, inquiries from lenders, possible bankruptcy filings, or accounts sent to a collection agency.

For example, your credit report lists details such as:

  • Your full name (and any names you have used in the past)
  • Address
  • Social Security number
  • Installment loans
  • Credit cards
  • The balance owed on loans and credit cards
  • If you pay your bills late

How do you establish credit with no credit history?

Nobody begins their credit journey with an established credit history. In fact, one in 10 American adults, or about 26 million people, were “credit invisible” with no credit history, the Consumer Financial Protection Bureau (CFPB) found using 2010 Census data.1 If you have no credit history, there are several ways to begin.

Consider a credit card or secured card

To begin building your credit history, you might consider a first credit card or secured card. Credit cards may be offered to people with no credit history, often with a relatively small line of credit. For some people, obtaining a secured card is more realistic. A secured card offers a line of credit equal to the amount of a deposit you leave in an account with the lender. How well you handle your line of credit and repayments is recorded in your credit report.

Become an authorized user

Another way to establish a credit history is to be listed as an authorized user on another person’s credit card. Depending on the lender, this might be reported to a credit bureau and may influence your credit score. Because your credit history will be tied to the primary account holder, make sure you are an authorized user on an account that remains in good standing.

Pay your bills

In addition, some utilities or landlords might report your information on your credit reports.2 There are also programs available from credit reporting agencies and others that can factor your regular payment of rent, utilities, cell phone, streaming services, etc., into your credit score.3

How long does it take to build a credit history?

Your credit history begins when your name is on a credit account. To calculate a credit score, at least one account must be open for at least six months, according to FICO, which provides scores used by 90% of top lenders.

If you do not have a credit score, don’t feel alone. According to the CFPB, more than 45 million American adults have no credit score because they have limited or no credit history.4

Because the length of your credit history affects your credit score, the longer you have credit in good standing, the better your score might be. Credit scores are partly determined by how many years you have had your oldest account and the average age of the accounts that you have, among other things.

What is important to know about your credit score?

In addition to the basic details associated with your credit history and credit report, you also want to keep an eye on your credit score.

Based on your credit history, your credit score is calculated by the three credit bureaus. Here are some things to know:

  • Credit scores typically range from 300 to 850
  • The better your credit history as contained in your credit reports, the higher your score
  • Your credit score can vary among lenders, depending on which credit report and credit scoring model is used
  • The FICO® Score* is the most common scoring model used by lenders
  • You should review your credit score often. Many lenders offer free access to credit scores to their customers. As a Discover® customer, you can get your FICO® Credit Score, plus see important details that help make up your score for free.

How is your credit score calculated?

It is important to understand how FICO® Scores are calculated.5 Scores are based on five general categories:

  • 35%: Payment history
  • 30%: Amounts owed
  • 15%: Length of credit history
  • 10%: Credit mix
  • 10%: New credit

Because credit scores might change over time, it is a good idea to know your score, especially before you apply for a loan. Generally speaking, good financial habits may eventually lead to a higher credit score.

What events might negatively impact your credit score?

Just as there are things you can do to affect your credit score, there are several factors that can have a negative impact:6

  • Missing payments
  • Making late payments
  • Having an account sent to collections
  • Filing for bankruptcy
  • Losing your home to foreclosure
  • Maxing out your credit cards
  • Reducing the total amount of available credit by closing credit cards in good standing
  • Applying for many credit accounts at the same time

While some of these behaviors may have a greater impact on your credit rating than others, it is good practice to try to avoid them all.

Why is it important to know where you stand financially?

Your credit history and credit score might affect your finances in many ways, so it’s important to keep your eye on them. Understanding what your financial situation looks like to others and how you might make changes to improve it is an important step to help you set and achieve your financial goals.

Do you want to learn more about budgeting your money to improve your financial health? Read these tips to improve your money management.

Learn About Budgeting

Frequently Asked Questions

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.

* FICO® Credit Score Terms: Your FICO® Credit Score, key factors and other credit information are based on data from TransUnion® and may be different from other credit scores and other credit information provided by different bureaus. This information is intended for and only provided to Primary account holders who have an available score. See Discover.com/FICO about the availability of your score. Your score, key factors and other credit information are available on Discover.com and cardmembers are also provided a score on statements. Customers will see up to a year of recent scores online. Discover and other lenders may use different inputs, such as FICO® Credit Scores, other credit scores and more information in credit decisions. This benefit may change or end in the future. FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

1 https://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf
2 https://consumer.gov/credit-loans-debt/your-credit-history
3  https://fortune.com/recommends/credit-cards/programs-that-help-boost-your-credit-score-for-free/
4 https://www.consumerfinance.gov/about-us/blog/bad-credit-or-no-credit-when-you-want-buy-home/
5 https://www.myfico.com/credit-education/whats-in-your-credit-score
6 https://www.experian.com/blogs/ask-experian/actions-that-can-lower-your-credit-score/