The Integral Role of Credit Histories

By Leni Parrish on August 23, 2010

One cannot undervalue the importance of a Credit History. Since Banks discovered the worth of this recording system, it has become the most crucial determinant of every transaction that a customer has with his or her bank. The Concept of a credit History is therefore a very integral part on modern day banking.

The most popular query that customers have is how far a good credit history can take you. The credit History is a sum total of a person’s entire financial transactions, across banks and other financial agencies. A person’s credit history can be obtained from the place of their last finance related transaction.

A bank looking to gather details about a particular customer has only to locate their credit History. The details recorded in a credit History will sufficiently highlight the monetary character of the customer. The most common situation under which a person’s credit history is scrutinized is when a loan application is submitted. Before the Bank decides that a person can be granted a loan, their credit histories are analyzed to determine various details, such as details of other loans that the person may have already taken, the income, expenditure and other financial commitments, in addition to records of payments made. This last aspect is an important one and greatly affects the way a credit history appears.

A good history is computed when a person does not have too many liabilities, when the other payments have been made on time and there are no irregularities such as check bouncing etc. The sum total of these details paints a fairly clear picture of how responsible a person is when it comes to money and payments. Late payments, over a period of time can destroy a credit History. Every bank has accounts of loans denied to those with bad credit histories. Turning a credit history bad is relatively simple –though it must be understood that a couple of late payments will not completely ruin it. Every person, at some time or the other, under unavoidable circumstances may have made a late payment. Credit Histories are interested in trends rather than one time slip-ups.

If a person is a regular defaulter, there is no way a credit History can mask it. These are computed based on recorded data from banks and other financial agencies that the person may have associations with. No bank, sanctioning a loan of considerable amount will do so without scrutinizing credit History.

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