Credit history

credit history is a record of a borrower’s repayment of debts. [1] A credit report is a record of the borrower’s credit history, credit card companies, collection agencies, and governments. [2] A borrower’s credit score is the result of a mathematical algorithm applied to a credit report and other sources of information to predict future delinquency. [2]

In Many countries, When a customer fills out an Application for credit from a bank , credit card company, or a store, Their information is forwarded to a credit bureau . The credit bureau bureaux du bureau et de l’identification et des points d’identification du bureau du bureau du bureau et de l’adresse et l’identification du bureau et bureau de l’information et des données du bureau et des données du bureau et des données. Gathered The records are used by Lenders Then to determine an individual’s credit worthiness; that is, determining an individual’s ability and track record of repaying a debt. The willingness to repay a debt is indicated by how timely past payments have been made. Lenders like to see debtors, and particularly focus on the payment of debts, and, for example, consider an overpayment.

Credit history usage

There has been much discussion on the accuracy of the data in consumer reports. In general, industry participants maintain the data in credit reports is very accurate. [3] [4] The credit bureaus point to their own study of 52 million credit reports to highlight that the data is very accurate. The Consumer Data Industry Association testified before the United States that it was less profitable than it was in the past. [5] Nonetheless, there is widespread concern that information in credit reports is prone to error. Thus Congress has enacted a series of laws aimed at both the errors and the perception of errors.

If a consumer disputes some information in a credit report, the credit bureau has 30 days to verify the data. Over 70 percent of these consumer disputes are resolved and the consumer is notified of the resolution. [5] The Federal Trade Commission states that a large credit bureau notes 95 percent of those who dispute an item seem satisfied with the outcome. [6]

The other factor in the determination of whether or not a loan The higher the income, all other things being equal, the more credit the consumer can access. However, lenders grant credit granting decisions as a result of a debt, and a willingness to repay a credit report.

These factors help the lenders determine whether to extend credit, and on what terms. With the adoption of risk-based pricing is Almost all lending in the financial services industry, this postponement HAS Become Even More importantly since it is usually the sole element used to choose the annual percentage rate (APR), grace period and other contractual obligations of the credit card or loan.

Calculating a credit score

Credit scores vary from one scoring model to another, but in general the FICO scoring system is the standard in US, Canada and other global areas. The factors are similar and may include:

  • Payment history ( 35% contribution on the FICO scale): A record of negative information In general risk scoring systems for the future load offs, collections, late payments, repossessions, foreclosures, settlements, bankruptcies, links, and judgments. Within this category, FICO considers the severity of the negative item, the age of the negative items and the prevalence of negative items. Newer unpaid or delinquent debt is considered worse than older unpaid or delinquent debts. More severe is worse than less severe. And, many is worse than few.
  • Debt ( 30% contribution on the FICO score): This category considers the amount and type of debt. There are three types of debt considered.
    • Revolving debt: This is a credit card debt, a retail card debt and some petroleum cards. And while home equity lines of credit revolving debt is very much in order. The most important measurement of this category is called “Revolving Utilization”, which is the relationship between the consumer’s credit card and the credit card limits, also called “open to buy.” This is expressed as a percentage and is calculated by multiplying the result by 100, thus yielding the utilization percentage. The higher that percentage, the lower the cardholder’s score will likely be. This is why closing credit cards is not a good idea for someone trying to improve their credit scores. Closing one or more credit card accounts will reduce their total cost and increase their usage rate unless the cardholder reduces their balances at the same pace.
    • Installment debt : This is a debt where there is a fixed payment for a fixed period of time. An auto loan is a good example for the cardholder making the same payment for 36, 48, or 60 months. While the debt is considered in risk scoring systems, it is a remote second in its importance behind the revolving credit card debt. Installment debt is generally secured by an asset like a car, home, or boat. As such, consumers will make extraordinary payments to make their payments so that their assets are not repossessed by the lender for non-payment.
    • Open debt : This is the least common type of debt. This is a debt that must be paid in full each month. An example is any one of the variety of charge cards that are “pay in full” products. The American Express Green card is a common example. Open debt is treated like revolving credit card debt in older versions of the FICO scoring system is excluded from the revolving utilization calculation in newer versions.
  • Time in file ( 15% contribution on the FICO scale): The older the cardholder’s credit report, the more stable it is, in general. As such, their score should benefit from an old credit report. This “age” is determined two ways; the age of the cardholder’s credit card and the average age of the accounts on their credit file. The age of their credit is determined by the oldest account “date opened”, which sets the age of the credit card. The average age is set by the age of every account on the credit report, whether open or closed.
  • Account Diversity ( 10% contribution on the FICO scale): A cardholder’s credit score will be provided by a different set of account types on their credit file. Having experience across multiple account types (installment, revolving, auto, mortgage, cards, etc.) is a good thing for their scores because they are proving the ability to manage different account types.
  • The Search for a New Credit ( 10% contribution on the FICO scale): An inquiry is noted every time a company requests information from a consumer’s credit file. There are several types of inquiries that may affect one’s credit score . Inquiries that have no effect on the creditworthiness of a consumer (also known as “soft inquiries”), which remain on a consumer’s credit report for 6 months and are never visible to lenders or credit scoring models, are:
    • Prescreening inquiries WHERE a credit bureau May sell a person’s contact details to an institution That from credit cards, loans and insurance are some criteria based lender que la HAS Established.
    • A creditor also checks its customers’ credit files periodically. This is referred to as Account Management, Account Maintenance or Account Review.
    • A credit counseling agency, with the client’s permission, can obtain a client’s credit report with no adverse action.
    • A consumer can check his or her own credit report without impacting creditworthiness. This is referred to as a “consumer disclosure” inquiry.
    • Employment screening inquiries
    • Insurance related inquiries
    • Utility related inquiries
  • Inquiries that may have an effect on the creditworthiness of a consumer, and are visible to lenders and credit scoring (also known as “hard inquiries”). . Lenders, when granted a permissible purpose, as defined by the Fair Credit Reporting Act, can “pull” a consumer file for the purposes of extending credit to a consumer. Hard inquiries can, but do not always, affect the borrower’s credit score. Keeping credit inquiries to a minimum can help a person’s credit rating. A lender may perceive a lot of information about a person who is in a financial situation.

Acquiring and understanding credit reports and scores

Consumers can typically check their credit history and credit.

In the United States, the Fair Credit Reporting Act governs businesses that compile credit reports. These businesses include, Experian , Equifax , TransUnion , tocustomers, payday lenders, utilities, casinos, landlords, medical service providers, and employers. [7] [8] One Fair Credit Reporting Act requires that the consumer credit reporting agencies provide for it, once per year.

The government of Canada offers a free publication called Understanding Your Credit Report and Credit Score . This publication provides a sample credit report and credit score with explanations of the notations and codes that are used. It also contains general information on how to build or improve credit history, and how to check for signs. The publication is available online at , the site of the Financial Consumer Agency of Canada . Paper copies may be ordered at no charge for residents of Canada.

In some countries, in addition to privately owned credit bureaus, credit records are also maintained by the central bank . Particularly, in Spain , the Central Credit Register is kept by the Bank of Spain . In this country, Individuals can obtenir Their credit carryforwards free of charge by Requesting em online or by email.

Credit history of immigrants

Credit history usually stays within one country. Even within the same credit card network or within the same multinational credit bureau, information is not shared between different countries. For example, Equifax Canada does not share information with Equifax in the United States. If they have been living in Canada, they may not be approved because of a lack of US credit history, even if they had an excellent credit rating in their country. home country.

An immigrant may end up establishing a credit history from scratch in the new country. Therefore, it is usually difficult to obtain credit cards and mortgages until after they have worked in a country with a stable income for several years.

This practice is not common. Among credit card companies, American Express can transfer credit cards from one country to another.

Adverse credit

Adverse credit history , aussi called Expired sub-prime credit history , non-status credit history , impaired credit history , poor credit history , and bad credit history , is a negative credit rating .

A negative credit rating is often considered to be advantageous to lenders and other extenders of credit for the purpose of loaning money or capital. [9]

In the US, a consumer’s credit history is compiled into a credit report by credit bureaus or consumer reporting agencies. The data reported to these agencies are primarily provided by the United States. Detailed account information, including payment history, credit limits, high and low balances, and any aggressive actions taken to recover overdue debts, are reported regularly (usually monthly). This information is reviewed by a lender to determine whether to approve a loan and on what terms.

As credit has become more popular, it has become more difficult for lenders to assess and approve credit cards and loans in a timely and efficient manner. To address this issue, credit scoring was adopted. citation needed ] A benefit of scoring was made cheaper. [10]

Credit scoring is the process of using a proprietary mathematical algorithm to create a numerical value that describes an applicant’s overall creditworthiness. Scores, frequently based on numbers (in the United States), statistically analyzing a credit history, and comparing the magnitude of financial risk. Since lending money is a risk, credit scoring offers a standardized way of assessing risk and having no risk. citation needed ] All credit bureaus also offer additional credit .

Credit scores assess the likelihood that a borrower will repay a loan or other credit. The higher the score, the better the credit history and the higher the probability that the loan will be repaid on time. When creditors report an excessive number of late payments, the score suffers. Similarly, when adverse judgments are reported, the score decreases even more. Repeated delinquencies or public record entries may be a negative credit rating or adverse credit history.

A consumer’s credit score is a number calculated on the basis of how much credit they have, how much they have owed, their ability to pay on their bills on time, how long they have had credit, and their types of credit. The three major consumer reporting agencies, Equifax, Experian and TransUnion all sell credit scores to lenders. Fair Isaac is one of the major developers of credit scores. The complete way in which a consumer’s FICO score is calculated is complex. One of the factors in a consumer’s credit score. When a lender requests a credit score, it can cause a small drop in the credit score. [11] [12] This is because, as a result of a relatively short period of time, the situation is more likely to be financially difficult.


The information in a credit report is made by credit unions to organizations that It is also available to other entities with a “permissible purpose”, as defined by the Fair Credit Reporting Act. The consequence of a negative credit rating is typically a reduction in the likelihood that it will be approved. Interest rates on loans are significantly affected by credit history; the higher credit rating, the lower interest, while the lower credit rating, the higher interest. The increased interest is used to offset the low rate of the group.

In the United States, insurance, housing, and employment can be denied on a negative credit rating. A new study shows that employing credit checks on job seekers are preventing them from entering the working circle. Estimated figures indicate that one in four jobs. The size of this phenomenon has become a major concern of the US administration. Federal regulations require employers to receive permission from job candidates before running credit checks, but it will be impossible to enforce the use of disclosure. [13]

Note that it is not the credit reporting agencies that decide whether a credit history is “adverse.” It is the individual lender or creditor which makes that decision; Each lender has its own policy on what falls within their guidelines. The specific scores That Fall Within a lender’s guidelines are MOST Often not disclosed to the application covered due to competitive Reasons . In the United States, a creditor is required to give the reasons for denouncing credit to an applicant and to provide the information that is used to make the decision.

More than one credit history per person

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In some countries, people can have more than one credit history. For example, in Canada, the most people are not aware of it, every person who applies for credit before obtaining a Social Insurance Numberhas two separate credit histories, one with SIN and one without SIN. This is the credit reporting structure in Canada. This article is published in the French and English version of the article, and is often published in the French text, but often leads to inconsistencies. would have gotten the help of the reporter without providing the SIN. This is because, when someone gets a new SIN for whatever reason. As a result, a record with SIN zeroed out is kept separately from a record with SIN. Note this happens without the person even knowing it. citation needed]


The credit rating of creditors and creditors in the credit scoring system. For example, previous ownership of a credit card may increase the individual’s ability to obtain further credit, while Certain telecommunication companies and their relationship with credit reporting have been established by the government of the United States. [14] While the credit reporting system is designed to protect both lenders and borrowers, there are loopholeswhich can not be allowed to abuse the system. A few of the motivations and techniques for credit misuse include churning , rapid credit credit applications, repetitive credit checks, selective credit freezes, applications for small business rather than personal credit, piggybacking and hacking, as it happened with Equifax in April and September 2017. [ 15]

After security Breaches thesis, a Global Credit Profile (GCP) blockchain Project Was annoncé on September 13, 2017 by Pave Inc. [16]

Furthermore, fraud can be committed to consumers by credit reporting agencies themselves. In 2013, Equifax and TransUnion were fined $ 23.3 million by the Consumer Financial Protection Bureau (US) for the cost of their services. [17] Services advertised as $ 1 were actually billed at $ 200 per year. [18]

See also

  • Alternative data
  • Comparison of free credit report websites
  • Credit office
  • Credit card
  • Credit score
  • Credit score in the United States
  • Zombie credit
  • Identity theft
  • Fair Credit Reporting Act
  • Fair and Accurate Credit Transactions Act
  • Fair Debt Collection Practices Act
  • Office of Fair Trading
  • remortgage
  • Seasoned trade lines


  1. Jump up^
  2. ^ Jump up to:b
  3. Jump up^ Credit Report Accuracy and Access to Credit. Federal Reserve Bulletin. Summer 2004
  4. Jump up^ Allstate Insurance Company ‘s Additional Written Testimony: Allstate’ s Use of Insurance Scoring. Jul 23, 2002.
  5. ^ Jump up to:b Prepared Statement of the Federal Trade Commission on Credit Reports: Consumers’ Ability to Dispute and Change Inaccurate Information: Hearing Before the Committee on Financial Services . Jun 19, 2007.
  6. Jump up^ Report to Congress on the Fair Credit Reporting Act Dispute Process. Federal Trade Commission. Board of Governors of the Federal Reserve System. Aug 2006.
  7. Jump up^
  8. Jump up^
  9. Jump up^ Turner, Michael A et al., Give Credit Where Credit Is Due , Political and Economic Research Council, 1.
  10. Jump up^
  11. Jump up^ “Facts & Fallacies” . Fair Isaac Corporation . Retrieved 2007-08-08 .
  12. Jump up^ “What’s In Your Score” . Fair Isaac Corporation . Retrieved 2007-08-08.
  13. Jump up^ Bad credit cost me a job. Ellis Blake, CNN: Aug 2013.
  14. Jump up^
  15. Jump up^ “Why the credit agencys breach is needed” . The New York Times.
  16. Jump up^ “New Pave’s Decentralized Global Credit Profile (GCP) Unlocks Access to Credit for Millions of Americans” . Lending Times.
  17. Jump up^ “Equifax Transunion fined 23 million for mispresenting credit products”. The Washington Post Times.
  18. Jump up^ “Consumer Financial Protection Bureau official website” .

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