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Credit History and its Effects

What is Credit History?

Good credit history is to say that a customer has been able to manage his funds and make the payments of time. Well, bad history speaks of the liabilities a customer hold and unable to repay on time. But what actually Credit history means? The credit history speaks of the customer credit reputation in the market on the basis of which the customer earns and makes profits. Also known as credit report or credit score, this is used by the lenders to determine customer’s credit worthiness. Where positive report will fetch him more credit, bad credit score can be a hurdle in availing the finance. The history in complete seeks the most authentic information of customers ability as well as track record of paying the debts that he holds. Credit history of a customer is divided into two groups. Good credit history and bad credit history. The evaluation of the credit history is usually done by these two parameters.

Credit History Evaluates the Credit Worthiness of the Customer

Credit history ensures lenders such as credit card companies and other financial lenders to evaluate the true worthiness of the customer. Usually the customer, who is interested in taking credit, need to fulfil certain criteria and fills an application for the credit required. The credit lenders can be bank, credit card companies, store or lenders. Once the details are filled, the information is forwarded to the credit bureau which makes necessary verifications and provides a consolidated report of the customer’s credit history. An effective way to track whether timely payments have been made in the past and the debt obligations, missed payments etc., can be done with the credit report.

As such the credit report is based on the parameters, good credit score and bad credit score, let’s take a look what are the effects on customer’s credit worthiness.

  1. Credit score talks about the payment history of the customer. Where positive information about the payment history can fetch the customer credit in short span of time, negative information can decrease the number of credit lenders. Charge offs, foreclosures, bankruptcies, late payments are very facts of the credit history that are considered to evaluate credit report.
  2. The second next, is debt. The debt considers the amount of payment towards the debt taken and the payment made. Credit report, too considers the debt fact.
  3. Good credit history will in no time make things easier for the customer and helps with more returns, whereas bad credit history in no way is fruitful, rather would create discrepancies and suspicious eye on the customer debt paying worthiness.
  4. As a number calculation, credit report grants customer reputation in the market. It evaluates the ability of the customer. With bad rating ultimately there is a decrease in the likelihood of getting the lender approval.
  5. The credit report gives full liberty to the lenders to decide and discuss the lending terms with the customers. Each lender has its own policy and specific scores to address the credit value of the customer.

To conclude, the credit score is the snapshot of the customer which ultimately helps the customer to win more favour of the lenders.

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