Why do I need a credit history?

Having a credit history is important in your financial life for a few key reasons.

Making important purchases

To make most large purchases, such as homes and cars, people borrow money. Your credit history makes a difference in the cost you pay for the loan. Even if you pay cash for the purchase, your credit history can affect the amount you pay for insurance on the home or vehicle.

Using a credit card or bank account

For day-to-day spending, most people use bank accounts and credit cards. Businesses can use your credit history to decide whether to open a bank account for you, or to offer you a credit card. They also use it to set the interest rate that applies to your credit card. A strong credit history means you pay lower interest charges.

Buying or renting a home

Whether you want to buy or rent a home, your credit history plays a role. Landlords check your credit to decide whether to rent to you, and whether to ask you for a larger security deposit. Mortgage lenders check your credit when they decide whether to offer you a home loan, and what interest rate to charge you.

Avoiding costs and problems

When there are negative items on your credit report, like missed payments or high balances, it can be harder or more expensive to do the things you want to do:

• You could be turned down for a loan or offered a loan with more expensive terms
• You could be asked for large deposits, such as to get a rental home, turn on utilities, or get a cell phone
• You could struggle with high costs, because your monthly payments for expensive loans could be high

Find out more about how to get and keep a good credit score

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