Heartland Bank and Trust Company | Credit History Is More Important… (2024)
When applying for most loans, lenders will be sure to focus on your credit score – a three-digit number that plays an important role in qualifying for loans, credit cards, apartment rentals and more. However, your focus should be placed on something else instead: your credit payment history.
Your credit payment history is the most important factor affecting your credit scoreand unlike your credit score, it’s something you can review and manage on your own. Here are four important steps that you should complete:
Step 1: Order a Credit Report
Getting a copy of your credit report is the best way to view your credit payment history.
The best way to do that is by visiting the government-authorized website annualcreditreport.com. You can go there to order a free credit report from any of the three big credit-reporting companies: Equifax, Experian and TransUnion.
Once you get a copy of your credit report, be sure to review your credit payment history for the following:
Inaccurate personal information
Unrecognized credit, loan and household-bill accounts
Incorrect payment history entries
Any inaccurate account status (such as a closed account marked as open)
Incorrect credit limits and balances
Any other errors
Any unresolved debts (overdue balances that remain unpaid and may even be flagged for collection)
Your findings will tell you what kind of action you may need to take.
If you determine your history is accurate and positive, you can take comfort in knowing your credit score will reflect that. No action is necessary. You can skip Step 3 below and move on to Step 4.
However, if you see any blemishes, such as inaccurate entries or unresolved debts, those could have a negative impact on your credit score. Move on to Step 3 below.
Step 3: Repair Your History
You’ll want to address any credit information that is inaccurate or unresolved.
If your credit report lists any incorrect items, be proactive. Contact the credit reporting company that supplied your report and request to have those items corrected. You also will need to contact each business that supplied wrong information to request a correction. For more detailed instructions about how to dispute errors, visit this Federal Trade Commission webpage: https://www.consumer.ftc.gov/articles/disputing-errors-your-credit-reports.
If your credit report lists an unresolved item, then take action to remedy the situation. For example, if your report lists an open collection action, contact the creditor. Ask if you can negotiate for either new payment terms or a total payment that is less than what you actually owe. Then follow through with the new plan and pay down that debt as quickly as possible. This will help clean up your credit history so that you can reapply with confidence.
Step 4: Keep Checking Your Credit History
Continue to order free copies of your credit report. Then compare each new report with your previous reports. You’ll want to make sure the reported information is accurate. That’s because it's always easier to correct inaccuracies sooner rather than later.
Do You Want to Get on the Road to Owning a Car or Home?
Building a more perfect credit history is key to making that happen. However, at Heartland Bank, we understand that financial situations can be unique from one to another and that’s why we offer our Money Matters Small Dollar Loan Program, to assist you in building or repairing your personal credit.
Interested? Sign up for a class - offered year-round, both online and in person!
This article may reference and link to third party information that has been verified to the best of our abilities. There is no guarantee of accuracy. Heartland Bank does not endorse companies, services, or products referenced in its articles and is not responsible for the content, links, privacy, or security policies of these third parties. Information in the above article may include material from the AnnualCreditReport.com (https://www.annualcreditreport.com/index.action), the Federal Trade Commission website (https://www.consumer.ftc.gov/articles/disputing-errors-your-credit-reports) and the Heartland Ban and Trust Company website (https://www.hbtbank.com/).
This content is for informational purposes only. Readers should under no circ*mstances rely upon this information as a substitute for their own research or for obtaining specific advice from their own counsel.
When applying for most loans, lenders will be sure to focus on your credit score – a three-digit number that plays an important role in qualifying for loans, credit cards, apartment rentals and more. However, your focus should be placed on something else instead: your credit payment history.
A strong credit history, reflected in good credit scores, will let you qualify for lower interest rates and fees, freeing up additional money to set aside for emergencies, retirement, and other smaller unexpected expenses. Decreasing debt and increasing savings reduces stress and leads to greater financial freedom.
Checking your credit file can help you spot potential identity theft or fraud early. If you see an address that's unfamiliar, credit accounts you didn't apply for or activity on credit cards you have not used recently, a credit report can give you a heads-up.
There is no single credit score that's considered the most accurate. The truth is, there are several types of credit scores available to lenders—and many versions of each of those scores. Scores are calculated based on many of the same factors.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2023, the average FICO® Score☉ in the U.S. reached 715.
Yes, having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.
Once you build up a record of on-time payments, you'll start having a credit history, your credit score will start moving up, and you'll find it's a lot easier to qualify for a more competitive credit card.
For the majority of lending decisions most lenders use your FICO score. Calculated by the data analytics company Fair Isaac Corporation, it's based on data from credit reports about your payment history, credit mix, length of credit history and other criteria.
You can start by going to the three major credit bureaus, Equifax, Experian, and TransUnion first by logging on to AnnualCreditReport.com to check your report for free. Each agency gives you access to your report once every 12 months.
Equifax is the largest credit bureau in the U.S., but TransUnion and Equifax are thought to be just as important. When it comes to credit scores, however, lenders prefer FICO Score by a wide margin.
Checking your credit history and credit scores can help you better understand your current credit position. Regularly checking your credit reports can help you be more aware of what lenders may see. Checking your credit reports can also help you detect any inaccurate or incomplete information.
Of these factors, payment history and credit utilization are the most important information. Together, they make up more than 60% of the impact on your credit scores.
Your credit rating is important as lenders use it to help decide if they'll give you a loan or credit, how much they'll lend you and how much interest they'll charge you.
FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
Why is it important to build a credit history? A credit history is one of the ways lenders decide whether or not to lend you money. It's partly from looking at how reliable you've been when it comes to making payments on time in the past, that they make a judgement about whether they want to lend to you now.
But length of credit history accounts for 15 percent of your FICO score and around 20 percent of your VantageScore credit score (in combination with your “credit mix,” or the types of credit accounts you use). Having a solid length of credit history on your credit report has the potential to improve your credit score.
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