You know lenders pull your credit to determine if you qualify for a mortgage, but do they look at your credit score or credit history?
The truth is that lenders look at both factors. They want to know your credit score, as it gives them a snapshot of your level of financial responsibility. They also want to know your credit history, though, to see your historical pattern of making payments and such.
Keep reading to learn the differences between the two.
What’s a Credit Score?
Your credit score continually changes. It’s a numerical calculation of your credit history. It may go up if you don’t have any negative factors affecting your score one month and it may go down if you have negative factors occur.
The most common negative factors are:
- Late payments
- Opening new credit lines
- Having too much credit extended at one time
- Closing accounts and decreasing your average credit age
- Having too many inquiries
Positive factors that could increase your credit score include:
- On-time payments
- No new credit lines opened
- Keeping your accounts open to have an older credit age
- Not having any new inquiries
- Paying your debt down to keep your utilization rate low
Your credit score is a combination of all of the factors. It doesn’t mean if you open a new credit line that your credit score will tank. It also doesn’t mean that if you don’t open any new credit lines that your credit score will be super high. It’s a balance between all of the factors.
When your credit score changes lenders won’t know what your previous scores are as they get replaced with your current score. They only know your current credit score as of the date that they pull your credit. They won’t know if you had a 500 credit score a few months ago or if you had an 800 credit score before.
What’s a Credit History?
A credit history is a report of all of your past credit. If lenders wanted, they could look back as many years as your credit is old. If they wanted to know how you handled your mortgage for the last five years, they could see it in your credit history.
Your credit history includes all of the following:
- Your payment amount
- Whether you made your payments on time
- Your current balances due
- Your overall balance or credit line
Your credit history will also show all public record information, such as if you had any bankruptcies, foreclosures, or judgments. It will also show if you have any collections, whether currently outstanding or paid in full. Finally, your credit history will show if you have any inquiries. Your inquiries will stay on your credit report for two years for lenders to see, but it only affects your credit score for a short amount of time.
While you can’t change your credit history, you can make positive steps moving forward. If you know you had a time when your credit score fell, do what you can to make your credit score increase. Pay your bills on time, decrease your outstanding credit, and avoid any new inquiries on your credit report unless absolutely necessary. The more positive steps you take to keep your credit score up and your credit history looking positive, the better your chances of loan approval become.