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Put simply, credit is the reputation for repaying debts on time. The better your credit, the more willing companies and people will be to lend you money, issue you a credit card, let a house or flat to you, hire you, or provide services to you on favourable terms.

The Good, the Bad, and the in Between

Good credit doesn't require a spotless payment history, but poor credit, once established, can be difficult to escape. When you apply for a credit card, personal loan, or any other type of credit, the lender must decide if you are a good credit risk. Creditors do this by checking your background to see how you've paid debts in the past. A poor repayment history will hurt your ability to receive credit.

To determine if you are a good credit risk, most lenders use requirements and scoring systems. You will need to pass the requirements for factors such as type of occupation, length of employment, and annual income. Applicants may also receive scores for the number of previous or current creditors who have rated their credit payment history highly. See Credit Scores to learn more.

If you are deep in debt and are applying for more credit, a creditor may consider you to be over-extended and deny your application, believing you may not be able to handle additional payments based on your income and existing obligations. See Getting out of Debt to learn more.

When you apply for credit, each creditor may access your Credit Report. Their searches will be recorded on your report. Some creditors automatically reject an applicant if their credit report shows an excessive number of searches over a short period, believing from experience that good credit risks usually don't have many credit searches. A search can remain on your Credit Report for as long as two years.

If you have committed yourself to relatively few creditors and have maintained a high credit score, lenders may look at how long your credit commitments with those creditors will continue. If you are near the end of your current commitments, the lender may consider extending credit to you because you will soon have more income to repay new debts at the end of your current commitments. See Rebuilding Damaged Credit for more information.

Check your Equifax Credit Report™ to see your reported payment history, account balances, and inquiries.