What is Credit History and Why Does It Matter?

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Lenders need to know how well you manage your credit before they can grant you access to credit facilities. When a lender can trust that you are reliable and will repay debt based on your past transactions, they are more willing to make a loan available to you. However, if the lender cannot trust you, you will likely not be so lucky. 

Your credit history provides a record of your ability to manage your debt which gives lenders something tangible to evaluate. In this article, we’re going to share tips on cultivating good debt habits and offer you advice on how to salvage your credit score.

What’s in your credit history?

Your credit history is a record of your previous credit transactions, and it lets lenders see how well you manage your debt. This information can be pulled from several places including banks and credit reporting bureaus. 

Other pieces of information that are reflected by your credit report include your payment history, your account balance, and the age of your accounts. This information sheds even more light on your credit performance over time. 

If you’ve received any hard inquiries, derogatory marks, notices from collections, or bankruptcies, they will appear on your credit report and play a role in lowering your credit score over time. These negative attributes might render you ineligible for a loan in the eyes of lenders.

Where can I find my credit history?

Information about your credit history can be found in your credit report. To obtain copies of your credit report, send a request to any of the major credit reporting bureaus or have access to 24/7 credit monitoring when you sign up for MoneyLion’s Credit Builder Plus membership®️.

If there is ever false information on your credit report, such as an open line of credit you did not sign up for or even a credit pull you didn’t authorize, be sure to dispute these claims right away. They can negatively impact your credit score so taking action immediately is key. 

Why is credit history important?

To determine your eligibility for loans, lenders will analyze the details of your credit report. This is to ensure that you are qualified for a new credit line. Landlords, insurance companies, and employers will also rely on your credit score to determine if you are trustworthy.

Whether or not credit is extended to you depends on your credit score. An unsatisfied lender can choose to pull the plug on your loan if they are not impressed by your credit standing. On the flip side, lenders can also reward you for your good credit standing and extend the duration of your access to additional credit.

How is your credit score determined?

Your credit score is the sum of many parts. To calculate your credit score, you must consider five separate factors. 

Payment history accounts for 35% of your credit score.

Payment history is one of the determining factors of whether or not you are eligible for credit. If your payment history has a record of missing payments, then it is not going to be favorable for you. However, negative marks on your credit history will disappear after ten years. Your payment history accounts for 35% of your credit score, making it the most impactful factor of them all.

The amount of debt owed makes up 30% of your score. 

Another important factor in determining your credit score is the amount of money you owe. The amount of debts owed account for 30% of the lender’s test of credit worthiness.

The amount of debt incurred divided by your total credit limit is a value that’s known as your credit utilization ratio. There are three types of debt considered in the calculation of this ratio:

  • Revolving debt
  • Open debt
  • Installment debt

The length of your credit history is 15% of your overall score.

The longer your credit report, the more stable your credit history. So, your credit score tends to be higher when you’ve had open lines of credit report for longer. 

The length of your credit score is calculated by looking at…

  • The age of the credit file
  • The average age of the accounts on file

To keep yourself in good standing with lenders, you have to ensure that the details on your old credit accounts are available because credit history accounts for 15% of your total score.

Your credit mix determines 10% of your score.

A diverse portfolio is important. With a diverse credit mix, your account will have many different credit types on the file, like a mortgage or various credit cards. 

Diversity shows your ability to manage different types of credit. When you have installment accounts and revolving credit such as loans and credit cards, you end up actively boosting an important factor that represents 10% of your total credit score.

New credit affects 10% of your score.

When a company asks for information from a consumer’s credit file, it’s called an inquiry. The two types of inquiries are a soft inquiry and a hard inquiry. 

A soft inquiry does not affect the debtor’s credit score, but hard inquiries do. When hard inquiries are conducted, they affect your credit score in a negative way.

Opening new lines of credit can lower your total credit utilization ratio. However, be careful and avoid opening too many lines of credit in a short period of time, as this can actually lower your credit score.

Tips for building your credit history

Now that we have an idea of what credit history is and how it works, let’s look at ways to improve it.


Getting a co-signer is a brilliant idea. As a co-signer, someone you trust will sign a document that makes them liable for certain financial responsibilities that you fail to uphold.g A co-signer promises to pay the debt on your behalf if you fail to pay.

Ask to be an authorized user

In order to become an authorized user, you will have to ask to be added to an account. This does not give you access to the account or the details within the account. It merely allows you to reflect the account’s credit on your own credit score.

Apply for a Credit Builder loan

Another way to build up your account is to apply for a credit builder loan. The Money Lion Credit Builder®️ loan offers loans up to $1,000 in the form of same-day funding. With affordable $19.99 monthly payments and no hidden fees, you can’t go wrong.

Secure credit card

It is always ideal to use a secure credit card. With upfront cash deposits, you’re on the right track to building your credit history.

The MoneyLion cashback program

Your economic future is dependent on your credit history, so you should try to build your credit history as much as you can. It’s wise to put yourself in a favorable financial position. 

If you’re looking to earn money on daily purchases and pay your debts as you go, our MoneyLion cashback program is right for you! With our cashback programs, you’ll earn a cash-back bonus on all of your spending. This way, you’ll have some extra cash to pay off your debt sooner.

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