How Does Good & Bad Credit History Affect Your Credit Profile?

How Does Good & Bad Credit History Affect Your Credit Profile?

Rain Team

April 6, 2022

Your credit history tells about your borrowing behavior, and it is a mirror of how responsible you are for your debts. It contains the record of your loans, credit cards, and credit accounts; a consolidated record of your every debt, all your credit scores.

Credit history plays a massive role in your financial life, and it helps lenders decide whether you're a reasonable risk. Your credit history can mean approval or denial of a loan, and it can also factor into how much you're charged in interest, making debt more or less expensive for you.

What is Good Credit History?

Good credit history is what improves your credit history report, bringing you into the good books of credible lenders. One must know everything that makes their credit report fine and start working towards that as soon as possible. Lenders see you as a responsible borrower if you pay dues on time, and your credit report shows you are punctual with payments and pre-payments as well.

Advantages of good credit history.

Good credit history can help magnitudes in improving your overall credit report. Establishing a good credit score enables you to save money and make your financial life more manageable. If you're trying to find reasons to maintain good credit, let us help you. When it comes to acquiring credit loans, the luxury of choice is limited only to those with a favorable credit score. A good credit history means having your favorite pick from many credit options. You get entrusted with tons of choices if you can showcase a good credit report. The prospective lenders will regard you as a responsible and trusted borrower if you ensure the timely repayment of dues. 

With a good credit history, you'll always have the privilege of getting the best interest rates, and the less money you pay in interest, the faster you pay off the debt. A sound credit background also enables faster loan requests and credit applications, and it can prove invaluable in a medical emergency or any unforeseen event.  

Good credit history is furthermore desirable. A person with a solid credit background is exempt from frequent reminder calls and personal visits from loan collection agents or legal repercussions.

Contrariwise, one's bad credit history will naturally hold dire consequences for them.

What is Bad Credit History?

Bad credit history is what portrays you as an irresponsible buyer. Overdue debt, late payment of bills, and other defaults will put you in an undesirable light as a credible buyer in front of potential lenders. For instance, applying for multiple credit cards in a short duration reflects poorly. 

Implications of bad credit history.

There are several ways in which bad credit impacts one's life. Due to bad credit history, lenders are less likely to provide a new line of credit as the adverse history is an indicator of negligence to make payments on new loans or credit cards. 

You won't be surprised if we tell you that the chances of getting your credit application denied are usually high if there's a case of poor credit history. However, sometimes, credit agencies might still decide to approve your application. But there's a catch (of course!), which would be that you would most likely receive a higher interest rate than applicants with a good credit history. 

Credit repayments play a crucial role in evaluating credit history, and an adverse credit history indicates that you are more likely to default on your credit obligations. Also, the credit lender can consider you to be a riskier borrower when compared to a borrower with a good credit score. In such cases, credit companies can choose to charge you with a higher interest rate to compensate for the risk. The more you borrow, the more interest you pay. One can survive with bad credit, but it's not always easy and definitely not cheap. If you prove to be an irresponsible borrower, there's always the risk of being blocklisted by lending companies and other financial institutions. Unlike those with a sound credit score, your choice of credit options will trickle down to the bare minimum if you have a bad credit score. Several employers across companies follow a policy of verifying an applicant's credit history as part of the formal process. Bad credit history can notably reduce your chances of getting some jobs. That's not all. If you wish to start your own business, poor credit history is nothing but bad news. No lending company or financial enterprise will consider sanctioning any loans to a person with a bad cibil score. 

Having bad credit can make renting an apartment or house much more difficult. If you find a landlord who will rent to you despite your low credit score, you may have to pay a higher security deposit.

Bad credit itself doesn't lead to debt collection calls. However, the chances are that if you have bad credit, you also have some past-due bills that debt collectors are pursuing. And who doesn't hate the constant nagging caused by the unwanted debt collector calls?

Now that you know the considerable role credit can play in your life, you may want to make sure your credit score is as strong as possible, keeping a regular credit report check. At the end of the day, your credit score can impact your life in substantial ways, even though there are only a handful of obvious ways your credit will affect how you live every day. The effects are usually hard to perceive, but that doesn't mean they don't matter; take the time to improve and check your credit score by paying all your bills on time and in whole, paying down your debts, and avoiding opening new lines of credit until you've mastered what you already have.