The term credit history is used to describe a section of information appearing on a credit report. The credit history section contains a record of both a consumer's applications for new credit as well as the repayment patterns for existing loans or revolving lines of credit.
When consumers apply for credit with a bank or another financial institution, the information contained in that application is often shared with credit reporting bureaus.
Creditors also report payment patterns of their borrowers to credit reporting agencies, which assemble this information into individual reports. Over time, this exchange of information allows the credit reporting bureau to provide lending institutions with a credit risk score. This score allows the lender to understand the applicant's likelihood of eventually repaying the loaned money.
Maintaining a good credit history makes it easier to borrow money from creditors. For example, a borrower that makes monthly payments in-full, and on-time, is likely to be trusted with additional credit. A poor credit history can make it difficult to even obtain small loans, and increases the likelihood of paying higher interest rates.
Employers often check an individual's credit history before making a hiring decision. This allows the employer to understand if the new hire is fiscally responsible. Insurance companies are also known to evaluate credit when writing policies. For all these reasons, it is important to make sure the credit reporting agencies have an accurate account of all repayment patterns.