Not sure about the difference between these three things? Simply put, your credit profile is made up of two things:
1. Your credit score.
2. Your credit history.
Your credit score is based on your credit history.
But here is the thing – your credit score only matters if you are planning to get a loan or credit card or if you are looking for a new job or apartment (some employers and landlords check credit scores).
If you are not planning to do any of those things — then your credit score doesn’t matter.
Also — please DO NOT feel shame or guilt about negative things that might be in your credit history. First of all, absolutely nobody has done everything perfectly! Secondly, you were probably doing the best that you could given your situation at the time, so give yourself some grace — there are many worse things in this world than a bad credit score.
That being said, when the time comes that you DO need to do one of those things where a good credit score will help, that can take time to build. So it pays to start now, before you actually need it.
Your Credit History
Your credit history is what your credit score is based on. If you have false negative items on your credit history you can dispute them. But if you actually did them then the only thing you can do is wait for them to become older than 7 years, since that is how long they can keep negative items on your credit history (10 years for bankruptcies).
But you can also take new, positive actions that will be added to your history and then taken into account when calculating your credit score.
For example, if you have late payments in your credit history — make sure to pay all bills on time from now on. Eventually the on-time payments will outweigh the late payments.
I’ll be doing a future blog post with an explanation of how your credit scores (there are more than one!) are calculated, but for now I’ll just say the two most important things are making all payments on time and paying off any outstanding credit card debt.
Keeping an eye on your credit history can also be a way to spot identity theft. If you see a credit application or other activity on your credit history that you did not do, that could mean that your identity has been stolen. This will also be a future blog post!
There are three credit bureaus that keep your credit history:
- Equifax
- TransUnion
- Experian
By law all three of them need to give you one free credit report per year. A credit report is a document that shows your credit history. The official website for getting your free credit reports (i.e. credit history) from these three bureaus is:
It only takes a few minutes to get your credit report, so go and get one now. If you are new to all this, just pick one of the three bureaus to get a report from, and then make sure to download it and save it since you will want to take some time to really review the details and make sure everything is on the up-and-up.
What’s In Your Credit History
If you have never looked at your credit report before, you might be surprised by how much information they have.
You will see old addresses, old phone numbers, old credit cards you forgot about, and how long you have had various accounts. It is really quite fascinating!
It will list any current credit cards, loans, or other forms of credit, and it will show your payment history. It will clearly indicate if you have any late payments that may be negatively affecting your credit score.
It will also show “soft inquiries” which is what credit card companies do before sending you those annoying “you are already approved!” letters in the mail. These do not affect your credit score. You will also see “hard inquiries” which are when you actually apply for credit. “Hard inquiries” can slightly lower your credit score for up to two years, so it is best to keep those to a minimum.
Disputing Incorrect Information On Your Credit History
This first step is to file a dispute with the credit bureau. All three credit bureaus allow you to file disputes online, or you can dispute things via mail. You will likely need to provide supporting information proving your case.
After this you will need to dispute it with the company that is providing the incorrect information to the credit bureau.
The credit bureau will do an investigation, and notify you of their findings. If they don’t agree with you, you can ask to have a statement added to your credit report explaining the dispute.
But remember – if you actually did the negative thing you have no grounds to dispute it, and the credit bureaus are not required to investigate frivolous disputes.
You can read more about this process in this excellent article from the Consumer Financial Protection Bureau.
Financial Coaching Can Help
Want help improving your credit score and getting on top of all the good financial habits that help give you a good credit history? Sign up for a free introductory coaching session. I offer affordable coaching packages and an up-front pricing structure. Together we can get you on track to a better financial future!
