What does Credit History mean and why is it important?

Credit history is one of the most important things for any lender to lend money to someone. Simply put, it is a person's habit or history of paying off the liabilities like bills and loans.

When you apply for a loan, higher purchase, or any credit application, the lender looks at your affordability to serve the loan and if you are a good payer or not,. That is where your credit history comes into play. If in the past you paid your regular instalments without any misses or going into arrears and also paid your bills on time, then your credit history should be good and vice versa if you were careless at meeting your commitments.

 

Remember, it is important to meet your financial commitments on time is crucial. If someone puts up an argument saying that they cleared the debts; however, it was not on time, then they may still end up with credit history hiccups. For example, if someone has a car on finance and the weekly payments as per the finance agreement were $50 weekly, this person missed the payments for a few weeks; however, settling it at a later stage might not end up with the best of credit history.

 

Does the number of credit checks matter?

Yes, it does up to a certain limit. If a person has had just a few checks in the last 12 months, that does not affect the credit history much; however, if the same person had too many checks in a short interval of time that can have a negative affect on the credit history.