In a nutshell, most of us don't really know a lot about credit cards. Those financial articles on money, credit scores, and FICO are too long and complicated. Don't you ever just want a simple explanation? Well, beauties, here you have it! For the next few days I'm focusing on credit history. What is it, how do you establish it, and what effects it? I plan to keep it short and simple--money is boring unless your spending it! So let's figure out how it all works in a brief overview.
The reason many people get a credit card is to establish credit history, which is a record of a person's past borrowing and repaying history. Credit history determines your credit worthiness--will you pay it back consistently or will you be late on payments? In summary, it determines your responsibility with money.
A Good Credit History Will...
If you prove that you are financially responsible, it can help you get approved for a car loan, an apartment or home, cable or phone services, etc. It can also lower your insurance rates, which most people are unaware of. When you establish a good credit history, lenders will see that you are reliable, which will likely save you money on interest.
A Bad Credit History Will...
However, if you have a bad credit history, you are likely to be denied loans, credit cards, housing, etc., and it if you are approved for something, you might have to pay a higher interest rate.
And the Verdict Is...
So, yes, your credit history really is important. It can either save you money or cost you money in the long term.
How Can You Protect Your Credit Score?
Monitor your credit score! Get a credit score and report to track your credit history. Determine if you are, in fact, a financially responsible person. If you are, good for you! Keep track of that report and know that with your good credit score, you qualify for many benefits, like lower interest rates. If you have had a few financial mishaps, determine where you are messing up. Are your payments late? Do you have too many credit cards or outstanding loans? Then take the appropriate steps to determine how you can improve your credit score. And remember... you must be patient!