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What is credit history? The original meaning of the word “credit” is that one of the parties in a mutual contractual relationship is exposed to the obligation to perform the performance of the contract in relation to the time the counterparty delivers its performance. The contract must be binding and modern-day credit applies to all practical purposes loans of money or postponement of the obligation to pay for the purchase of goods and services on installment. The terms “creditor” and “debtor” are common to use on creditors and those who receive credit.

Also paying in advance for goods or services can be termed credit, but this is not much used in our days. The most common definition of the word credit in modern times is in the form of “having credit” or “enjoying credit”, which is usually associated with “being able to borrow”.

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The modern banking system is based on credit, the deposits that bank customers have on account with a bank is not money that the bank physically has in the form of banknotes and coins in a bank vault. It’s simply bookmarks that show how much each account holder is entitled to fraa his bank. If all account holders met simultaneously to get their money, the bank would only be able to pay off what they have in capital adequacy, which is usually about 8 percent of the money they have borrowed. This arrangement is the reason why governments throughout the world during the financial crisis in 2008 and 2009 (and in some later cases) went in and awarded big banks huge cash transfers.

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The word “credit history” is used in our days more in a negative than positive sense (as in “bad credit history”), which means that an individual or an entity has shown a weak ability throughout its history to make up for money that is borrowed. When applying for a loan, it is common for newer credit history to play a greater role for the creditor than older credit history. Some creditors may therefore claim that, for example, the borrower will not have payment notes that are more than 6 months while ignoring payment notes older than 6 months.

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Your credit history will be reduced if you make a claim unpaid for as long as it is registered as a payment note at a credit information agency. If you are not listed with payment notes, you are considered to have a normal credit history. A bad credit history can be enhanced if you get the payment reminder deleted by making it up. Basically, the credit history will be strengthened by paying bills by the date they expire, but in practice, the credit history is as strong as long as claims are unpaid as long as they cause payment remarks. You will not get a better credit story of paying bills 5 days before the due date expires or on the date the bill expires, compared to whether you pay it 14 days after the expiry of the deadline.

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The most crucial thing about not getting bad credit history is that you do not allow claims to be unsettled for as long as they are registered with companies with a license from the Data Inspectorate to make credit assessments. A claim may arise as a result of a bankruptcy, a debt collection, a concession, but also a wage and salary allowance with no payment.

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When an institution makes a credit rating or credit check, usually in connection with an application for a loan, credit card, account opening or similar relationship that has or has a financial balance, they will receive a feedback indicating the probability of the person being charged A payment note in the future is.

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In USA, as of May 2017, four players operate with credit ratings of individuals; Every, Creditsafe, Bisnode and Experian. A typical model for a credit check at one of these companies will produce a score between 1 and 100. The score is calculated based on an analysis of statistical information about all creditors in USA. Such a model will divide the American population into 100 equal groups, and the score 100 indicates the statistically lowest credit risk. In other words, 50 indicates an average credit risk, that is, a completely normal credit risk compared to the American population by the way, while the score 1 means that you are among the one percent of the credit-impaired population with the highest possible credit risk. You can say that low score means that the bank assumes you are a bad payer. At score 1, it is very unlikely that an application for a loan with credit check will provide a positive response.