How are Credit History and Payment History Different?

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Navigating the world of credit can sometimes feel like trying to decipher ancient hieroglyphics. Two terms that often get thrown around are "credit history" and "payment history." While both affect your credit score and are often mixed up, they have different impacts on your financial health. Keep reading as we break down the difference between credit history and payment history, explaining why they matter and helping you make informed financial decisions along the way!

Credit History Explained: Your Financial Biography

Think of your credit history as a long, detailed biography. It’s a record of all your credit activities over the years. This includes credit cards, loans, mortgages, and other lines of credit you've opened. Here’s what makes up your credit history:

  • Accounts Opened: Every line of credit you’ve opened, be it a credit card or a mortgage.
  • Balances Owed: How much you owe on these accounts.
  • Credit Limits: The maximum you are allowed to borrow on your credit lines.
  • Length of Credit History: How long each account has been active.

Your credit history is what lenders look at to understand your overall credit behavior. It’s like reading a novel about your financial decisions, giving them an overview of how you handle debt.

Why Credit History Matters

Your credit history isn't just a small piece of your credit score—it contributes about 15%. Having a strong credit history can unlock many financial opportunities. Here's how:

  • Loan Approvals: Lenders often consider your credit history when deciding whether to approve your loan application. A positive history increases your chances of approval.
  • Interest Rates: With a good credit history, you may qualify for lower interest rates on loans and credit cards, saving you money over time.
  • Credit Limits: A strong credit history can result in higher credit limits on your credit cards, giving you more financial flexibility.

Payment History Explained: The Report Card of Your Financial Life

Now, let’s talk about payment history. If your credit history is a biography, your payment history is like a report card. It shows how reliably you make payments on your debt. Here’s what it includes:

  • On-Time Payments: A record of whether you pay your bills on time.
  • Late Payments: Notes on any payments you have missed or paid late.
  • Defaults: Instances where you failed to pay back a loan or credit card debt.
  • Collections: Accounts that have been sent to collections due to nonpayment.

Why Payment History Matters

Your payment history is the heavyweight champ of your credit score, making up about 35% of it. Here’s why it’s so important:

  • Reliable Payments: Consistently making on-time payments demonstrates reliability to lenders and positively impacts your credit score.
  • Avoiding Penalties: Late or missed payments can lead to penalties and negatively affect your credit score.
  • Improving Creditworthiness: A strong payment history can enhance your creditworthiness, opening the doors to positive financial opportunities in the future. (Ex: It becomes easier to secure loans and credit cards with perks).

Ultimately, your payment history helps lenders gauge how likely you are to repay borrowed money. After all, why would anyone lend money if there’s a high chance it won’t be repaid?

Financial Wellness and Credit Building at Academy Bank

Understanding and managing both your credit and payment history are key steps toward financial wellness. And remember, at Academy Bank, we are here to help you every step of the way.

Ready to start building your credit? Check out our unique financial products, like the Credit Builder Secured Credit Card, designed to guide you on your credit journey. Get started today and take control of your financial future with Academy Bank!


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Subject to credit approval. Transaction and Penalty fees apply.  Credit Builder Savings account required. $5.00 quarterly fee charged to the Credit Builder Savings account if not enrolled in eStatements. Improved credit score is not guaranteed. Credit score is determined by credit reporting agencies based on multiple factors, but satisfactory performance on a credit card product can improve your credit score. Default on a credit card, including missed or late payments can damage your credit score. Once added, funds cannot be withdrawn from the Credit Builder Savings account and the Credit Builder credit card without closing the savings account and the credit card.