Why Is Your Credit History More Important Than Your Credit Score?
When you’re looking at personal finance tips, ” raising your credit score ” gets all the hype—and understandably so, since credit scores are checked when you try to rent an apartment, a car, or even when you buy a life. insurance. While a credit score is indeed important, don’t overlook the importance of your complete credit history . Here’s why your credit history carries more weight than your credit score, and how you can use that knowledge to your advantage.
Understanding credit history and credit rating
Before we dive into the importance of credit history, let’s clarify the difference between credit history and credit score:
Your credit history is a detailed record of your past and current credit scores, including how and when you paid your bills, how much credit you used, and any negative marks such as late payments or collections.
Your credit score , on the other hand, is a numerical representation of your creditworthiness, typically ranging from 300 to 850, calculated based on information from your credit history. The key point here is that your credit score depends on your credit history, so let’s dive into why this is important.
Why is credit history more important?
Simply put, your credit history is the very foundation of your credit score. In fact, payment history alone accounts for about 35% of your FICO score , which is the most widely used credit scoring model. By focusing on maintaining a positive credit history, you directly impact the most important factor in calculating your credit score.
While your credit score gives a quick idea of your creditworthiness, lenders often look deeper into your credit history when making lending decisions. They want to see the story behind the number, including:
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How regularly did you make payments?
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How have you managed different types of credit?
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Any patterns of behavior over time
Unlike your credit score, which is calculated by credit bureaus using complex algorithms, you have direct control over your credit history. Every payment you make (or miss) becomes part of that story, allowing you to actively shape your financial story.
Essentially, your credit history can explain circumstances that a credit score alone cannot explain. For example, if you had a period of financial difficulty but have since recovered and maintained perfect payments, your credit score will show this improvement over time.
Likewise, a credit history includes information that may not significantly affect your credit score but may be relevant to lenders, such as:
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Types of credit accounts you managed
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How long have you had different accounts?
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Credit usage over time
How to use your credit history
Now that you understand the importance of a credit score, here’s how you can use this understanding to your advantage:
Check your credit reports regularly
Regularly monitoring your credit history reduces the likelihood that reporting errors (at best) or identity theft (at worst) will undermine your financial health—and now you can do it for free every week indefinitely through Equifax, Experian and TransUnion . .
Focus on consistent and on-time payments
Since payment history is the most important factor in your credit score, make it a priority to pay all your bills on time, every time. Here’s my guide to the best time to pay your credit card bill.
Eliminate negative aspects
If there are negative items on your credit report, take steps to correct them. This may include making plans to repay outstanding debts or writing letters of goodwill to creditors .
Keep old accounts open
The length of your credit history matters. Keeping old accounts open, even if you don’t use them often, can improve your overall credit profile. Remember: Closing a credit card, even one you never use again, can negatively impact your credit score. Likewise, try to maintain a mix of loan types. Having a diverse credit mix (e.g., credit cards, installment loans, mortgages) can demonstrate your ability to responsibly manage different types of credit.
Bottom line
While your credit score is an important financial indicator, your credit history is the true foundation of your financial profile. By understanding and actively managing your credit history, you’re not just working to improve your credit score—you’re building a comprehensive financial history that can open the door to better lending terms, lower interest rates, and generally better financial opportunities. Focus on consistent, positive behavior, and your efforts will show in both your credit history and score over time.