While you have probably heard of the importance of your credit score, you are less likely to have heard of your credit history. Credit history is exactly that, what you did with your credit over the years. While a lender may look at your credit score as a quick indicator of whether you qualify for a loan, it’s your credit history that will be scrutinized once the lender is looking to give you final approval for the loan.
The credit score is determine by a mathematical algorithm that is applied at the moment your score is requested. Thus, it varies over time. When charge something or take on a new loan, it will likely drop. The bigger the new payment, the more likely your score comes down by a significant number of points. Why is this? Because your indebtedness is one of several factors that determine your score.
Credit history tends to be more stable, typically changing only as new activity is reported. Your credit history goes back as much as 10 years (for bankruptcies) though most things are track for 7 years. Thus if you had a late payment 7 years and 2 months ago, it will most likely not show up on your credit history. How can you find out what is being reported on your credit history?
The ONLY Free Source
The three main credit bureaus will provide you with 1 free report per year. To get your copy, go to annualcreditreport.com and follow the instructions. This is the only website where you will not be signed up for subsequent paid reports.
Recent vs Distant History
When looking through your report, note when a late payment, or underpayment or missed payment occurred. If it is within the last two years, you are better off delaying asking for a loan. If it is more than 2 years ago but less than four years ago, look at everything else (your income, your credit score, number of years on the job, etc) to see if you are demonstrating a stable, reliable person or one who may change the next day. the further back in your credit history that a blemish is found, the less likely it is to result in a denial of a loan. Of course, if you have many blemishes occurring in the past, this will not encourage the lender to make the loan.
If you have questions or have already been turned down for loan, contact me to discuss your situation. I may have an alternative solution to your need. You can reach me at 760 622 5087 or [email protected]