Credit history is all human lending activities over the past 10 years. How many installments and how much did they take? Which of them are currently open? Were there delays? These data form a person’s credit rating – a number that shows how trustworthy a borrower is. Based on history, a credit rating is derived. Bank employees can view information on any contract for 10 years.
3 Types of Credit History
- Positive. The borrower complied strictly with the contract – no delays. Quantity matters. The more loans you took and returned on time, the higher the rating. Credit rating is a dynamic quantity. For example, if you have 2 open overdrafts, the rating will decrease. You paid them without delay and closed – it will increase. Plus take into account the statute of limitations. The more time has passed, the less significant is the experience of the borrower under the contract (it is covered by more recent cases).
- Negative. (your rating is below average). It is formed if the borrower violated the terms of the loan (delays, attempts to sell collateral, etc.). Everything is taken into account: amounts, quantity, etc. The Bureau notes that the credit rating is just information. They do not tell organizations what to do – they only provide information. The creditor makes decisions and risks – he can also give money to a person from the black list.
- Neutral (zero). A person has not applied for loans for the past 10 years.
Which Is Better: A Positive Credit History or a Neutral One?
Positive credit history is better than a neutral one. It is due to the fact that when there is no information about a person, then the lender doesn’t know whether the person is a responsible borrower. And with a positive history, you can get large amounts at a lower percentage.
Find out your credit rating to understand why you have been rejected to get a loan or with the aim to assess the interest rate of the loan. When you know why, you can look for solutions. It is worthwhile to prepare in advance, find out the chances of getting a loan, and already with the information go to negotiations so as not to be refused.
The credit rating that the bureaus make is compiled according to their own criteria and based on the information they know. The bank will evaluate you differently. Therefore, according to the rating from the Bureau, it is impossible to say unequivocally whether they will give you a loan or not. It’s much more effective to carefully study your credit history.