Nowadays, the word “credit history” is often mentioned when speaking and writing about different types of loans. Particular emphasis is placed on how many problems a bad credit history poses and how important it is to try to keep it positive. However, not all of us have a full understanding of the meaning of credit history and how it is formed.
What is a Credit History?
Simply put, credit history is a summary of a person’s financial obligations that includes both past and present liabilities. However, that is not all. This report also indicates whether the person has fulfilled his obligations in accordance with the rules, namely, making payments on time. Not everyone is aware that credit history is affected by different types of bills – both credit and, for example, utility bills or timely payment of cell phone bills. This means that you run the risk of getting bad credit if you miss their due dates.
Credit history is compiled in the credit registers, which are used not only by banks but also by other non-bank institutions that provide leasing and loans. And of course, these registers can also be used by customers who are borrowing themselves to get information about their credit history at any given time. These reports also make it easy to see if someone else has borrowed your name, which is almost impossible today, given the multiple identifications and security checks.
Remember that every loan you apply for will appear in this credit record as you build your personal credit history, and it is up to you how good or bad your credit history will be.
Why take credit hack seriously?
Every lender reminds their clients that they need to be treated responsibly and carefully consider whether you will be able to repay the loan. This is important not only for the customer, but also for the lender. By borrowing responsibly, the customer makes sure that all bills are paid on time and that they do not have a bad credit history, and by doing so, they also facilitate the lender. Lending institutions also face certain risks, which is why credit specialists look at individuals’ past liabilities in detail to determine if they are past due, which leads to a bad credit history. Unlike banks, non-bank lenders provide loans to their customers without the need of a guarantor or pledge, and official and regular income is usually required as the only security, at least partially guaranteeing the lender that the loan will be repaid on time. However, if this does not happen, the credit institution must initiate a debt recovery process that is bothersome. And once the borrowing has reached such a serious stage, one thing is certain – there is a risk that you will now have a bad credit history.
Lenders are keen to work with individuals who do not have a negative credit history to ensure their security, that is to say, they have shown in the past that they are able to meet their credit obligations and make all payments on time. Conversely, if a credit history shows that a person has a bad credit history due to overdue or still outstanding obligations, it will serve as a warning signal to the lender to be cautious and refuse credit, as there is a high risk at the debt collection process. True, there may be times when a loan is granted but on significantly less favorable terms, such as a higher interest rate, which will result in the client having to overpay a larger amount when repaying the loan. Lenders are not interested in working with those who do not pay their bills on time.
Does my credit history keep records of late payments?
Impulsively taken out credit, overdue utility bills in the hurry, and the result – broken credit history? Of course, no one wants to be blacklisted, but if you are aware that you have made a mistake, you will definitely want to know how long the consequences could affect you. Does a really bad credit history mean ruined opportunities to borrow in the future forever? Fortunately, it is not. There are some things to keep in mind:
- If the overdue loan is repaid in full, your negative credit history will be extinguished five years after the debt is repaid;
- If the debt is not met, however, the bad credit history will be extinguished ten years after the first due date.
As you can see, bad credit history doesn’t set you a lifetime stamp, but of course, five or ten years is also quite a long time when you may need a new phone, home appliances, or other items that will require a loan or lease , but you won’t receive it because the institution will see that you have a negative credit history. Therefore, it is wiser to keep it positive.
Where to check your credit history?
Whether you’re worried about your credit history or not, there are several ways to check your credit history:
- Manakreditvesture.lv – is a portal maintained by the company “Credit Information Bureau”. By logging in with your online banking information and providing the personal information you need, you will be able to view your credit history twice a year for free and you will know which companies have requested this information about you.
- Credit Register with the Bank of Latvia – here you can connect with your eID card. You can then choose to receive your credit report electronically, in person, or by mail.