Why is credit history important for individuals?

Credit history is crucial for individuals as it serves as a vital tool for lenders to evaluate the likelihood that a borrower will repay their debts. When assessing a loan application, lenders review an individual's credit history to gain insight into their financial behavior, including payment history, outstanding debts, and how much credit has been used over time. A positive credit history indicates that an individual is likely to honor their repayment obligations, which can lead to better loan terms, lower interest rates, and increased chances of loan or credit approval.

This information is essential, as it also helps individuals understand their financial standing and the potential impact on future borrowing. In contrast, the other options provided do not accurately represent the primary role of credit history. For example, investment growth tracking or cash transaction records do not connect to credit history, and while the number of credit cards held may influence credit scores, it is not a direct measure of one’s reliability in repaying debts.