A credit history is a comprehensive record of credit accounts a borrower held since the day they first applied for a loan or credit card subscription. A credit history is found in a borrower’s credit report, which includes some relevant details like the type of account, responsibilities as a borrower, credit limit, the minimum and maximum amount owed and repaid, credit repayment status for the past 7 years, and the current balance if there is any.
In a credit history, the names of the lenders a borrower owed are also recorded. Bankruptcy, foreclosure, lawsuits, repossession, and other credit blunders can also be found in a credit history.
Importance of Credit History in real estate
A credit history is important when applying for a mortgage loan. This is why it is necessary for real estate brokers to check a home buyer’s credit report and credit score during the application process to check his or her ability to repay the loan.
Aside from a home buyer’s credit history, lenders will check into monthly income and savings and debt-income ratio. Poor credit scores often result in higher interest rates compared to higher credit scores.
Checking a credit history
As mentioned, credit history is recorded in a credit report along with the borrower’s credit score. This document is created and maintained by credit reporting agencies. In the United States, the Experian, TransUnion, and Equifax are the three major credit reporting companies.
All credit information is recorded and kept for seven years, thus doing something delinquent during these times can hurt your credit score, and may become a reason for real estate lenders to reject a loan application.