How Can Bad Credit History Affect Your Future Financial Transactions

How Can Bad Credit History Affect Your Future Financial Transactions

Credit history has long been a key term in the finance industry. It is crucial to understand what it is, why it’s recorded, and how important it is in tracking and managing your personal finances.

Credit history is a record of a borrower’s payment behavior that documents one’s ability to manage and repay debts. An individual’s credit history consists of the following information:

  • Number of credit accounts
  • Types and duration of credit accounts
  • Payment behavior
  • Amount owed for each account
  • Amount of available credit used

Financial institutions consider these factors in influencing their decision on whether to approve or decline a loan application—payment history being one of the most significant variables.

To improve access to credit data, Credit Information Corporation—a government-controlled and owned agency—collects and provides accurate credit reports through a centralized credit information system. Through this independent appraisal of an individual’s credit history, financial institutions can determine if a person is creditworthy and gauge whether or not to grant him or her a loan.

Banks, credit card companies, and lending institutions employ a rigorous evaluation process and require a good credit history when approving your housing loan and/or personal loan. Boost your approval rate by being aware of transactions that can make or break your credit score and start practicing legit ways to establish good credit history.

5 Things That Can Hurt Your Credit Score

Your financial transactions today may affect your purchases tomorrow. While it is essential to keep in mind financial tips to establish a good credit history, it is also necessary to know the factors that can hurt your credit score—this includes the following:

  • Late payments

Did you know that a portion of your credit score depends on your payment history? Consistently making late payments can seriously hurt your credit score, decreasing your chances of having your credit card or loan applications approved.

Although, delayed payments are better than not paying at all. Completely ignoring your credit card and loan bills can lead to having your account charged off, one of the red flags financial institutions can’t ignore when processing your application.

  • High or maxed out credit card balances

The second most important factor in evaluating your financial credibility is the total amount of debt. Using too much of your available credit or maxing out credit cards damages your credit score, affecting your overall creditworthiness and makes it harder to open a new credit card account or secure new loans.

  • Home foreclosure

Foreclosure occurs when you start getting behind on payments and default on your mortgage, leading to your lender taking ownership of your home. Late payments and foreclosure of your home will remain on your credit report unless rectified, affecting your future loan’s approval rate.

  • Length of credit history

Your credit score is also determined by the length of your credit history—having a long credit history increases your credit score. Keeping your credit cards active, especially your oldest account, can boost your approval rate as a borrower.

  • High number of recent credit inquiries

Whenever you apply for a new loan or credit card, it’s a standard procedure for banks and lenders to review your credit history to assess your financial capability. This process is known as credit inquiry, which also influences your credit score. A high number of credit inquiries within a short period can negatively affect your credit score.

  • Limited credit accounts

Having limited additional credit information combined with having just one type of credit account, be it a loan or credit card, can cause your credit score to drop. To avoid this, start expanding your credit today with Cashalo loans.

The Cost of Having a Bad Credit History

Wondering why the term ‘credit history’ has long been a buzzword in finance? Want to know what’s all the fuss about? Well, credit score says a lot about a person—and having a bad credit history can affect your future, from applying for loans to buying a house. The most adverse effects of having a low credit score include:

  • Higher interest rates

Having a good credit score may help you secure a credit with better rates. In turn, having a bad credit history may cast doubt on your ability to pay off your debt—driving financial institutions to compensate for the increased risk by providing a loan with a higher interest rate and a set of more restrictive terms.

  • Difficulty in purchasing a car

Financial institutions require a certain credit score to allow you to get a car loan. Having a bad credit score could increase the likelihood of banks providing you with an auto loan with a high-interest rate, or denying your application altogether due to patterns of late payments and records of credit defaults.

  • Low credit card and loan approval rate

Because credit card companies generally don’t like high-risk borrowers—people who are likely to default on their loans—getting your application approved can be very difficult when you have a low credit score.


Luckily for you, Cashalo is here to help! No need to worry about lack of credit history or credit accounts because Cashalo assigns credit scores and provide loans and credit to the underbanked individuals. With Cashalo, you can gain access to fast and secure loans with low-interest rates and minimal requirements in just a tap!

Understanding the basics of credit history, how it is evaluated, and how it can affect your future purchases is crucial in helping you establish and reach your financial goals. Although, keep in mind that the road to success is not always smooth. There will always be some bumps and obstacles to overcome, which is why it is also essential to come prepared—read up on ways to apply for a loan if you have a bad credit history and money management to settle debts.


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