I would want to know the applicant's credit history so as to be able to determine the likelihood of the applicant paying back the loan. An applicant that has a history of defaulting on loans or has maxed out credit cards is unlikely to pay back a loan.
For example, consider two applicants, Mr A and Miss B, who come to apply for a loan. Mr A. has a three maxed out cards, he has defaulted on a loan payment at another bank and he is currently unemployed. On the other hand, Miss B is a student with no history of debt. She came to apply for a loan so as to be able to pay for her college tuition.
Miss B has a better credit history when compared with Mr A. She is less likely to default on payment and hence she is a better candidate for the loan. If the loan officer does not check for this information, he would not be privy to the information and so he is in danger of giving the loan to the less suitable person.
Credit history is a report that provides information on the repayment of debt of an individual. It provides information about amount owed and how soon repayments were made. Credit history is usually contained in a credit report
Contents of a credit report
- Number of credit accounts
- Types of credit account
- Information on bankruptcies
- Amount owed
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