How length of credit history affects your credit score
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There are many details that can influence your credit score, including how long you’ve been using credit. Your length of credit history is somewhat minor compared with other credit score factors like payment history or credit utilization. But length of credit history accounts for 15 percent of your FICO® Score and around 20 percent of your VantageScore credit score (in combination with your “credit mix” or the types of credit accounts you use).
Having a solid length of credit history on your credit report has the potential to improve your credit score. That makes it a credit score category worth paying attention to and learning how to optimize.
What is your length of credit history?
Length of credit history describes the age of the accounts on your credit reports with the three major credit bureaus — Equifax, TransUnion, and Experian. Another way to describe length of credit history is the period of time the accounts on your credit reports have been established.
If you want to review your own length of credit history, you can do so by checking your credit report from one or more of the credit bureaus. Free reports are available each week from AnnualCreditReport.com through the end of 2023 in response to the COVID-19 pandemic. After that, you’ll be able to get a free credit report once every 12 months. You can also use paid services like myFICO to monitor your three credit reports and your FICO Scores for a deeper look at your credit information.
How is the length of your credit history calculated?
Three primary factors impact your FICO Score within the length of credit history category of your credit report.
- The amount of time your credit accounts have been open. (This includes the average age of your accounts, the age of your newest account, and the age of your oldest account.)
- The amount of time specific accounts have been open on your credit report.
- How much time has passed since you last used the accounts on your credit report.
Within the length of credit history category, a FICO scoring model will review your credit report and ask questions based on each of the characteristics above. For example, a scoring model might ask, “What is the average age of accounts on your credit report?” The answer to the question is called a variable. That variable determines the number of points you earn (aka the weight) which the scoring model then adds to your overall credit score.
How does length of credit history affect your credit score?
The older your length of credit history grows, the better the impact tends to be on your credit score. As mentioned, length of credit history is worth 15 percent of your FICO Score and around 20 percent of your VantageScore credit score (when combined with your credit mix of revolving vs. nonrevolving accounts).
While 15 percent to 20 percent might not seem significant, those numbers can make a meaningful impact where your credit score is concerned. Here are some examples.
- If you have a good credit score of 700, 15 percent of that number is over 100 points.
- With an excellent credit score of 800, 15 percent represents a whopping 120 points.
- Even with a fair credit score of 620, 15 percent of that number is 93 important points.
Establishing good credit can take time. So, it’s wise to get a start on the credit-building process as soon as possible.
What is a good length of credit history?
While there’s no such thing as the perfect “age of credit,” a FICO study reveals that for people with 800+ FICO Scores, their average age of credit accounts was 128 months (a little over 10.5 years). Yet that doesn’t mean that it will take you ten and a half years to earn good credit.
Those working to build credit for the first time may be eligible for a FICO Score once an account on their credit report is about six months old with payment history that’s been updated at least once. It takes even less time to be eligible for a VantageScore credit score. (You might qualify for a VantageScore credit score within a month or two of opening an account and having it appear on your credit report.)
Keep in mind that length of credit history isn’t the only credit scoring factor that matters. Your positive actions with regard to payment history and credit utilization can often make up for a younger credit age. Still, older accounts in good standing tend to help your score in many situations.
Plus, negative information on your credit report can have a bigger impact on your credit score than a young credit report or a thin credit file. It takes seven years for many types of negative information to age off of your credit report. As a result, avoiding late payments should remain a priority when you’re working to earn a positive credit rating.
Does closing a credit card hurt your score?
Many credit experts caution against closing credit cards (and for good reason). Closing a credit card could lower your credit score, but the reason for this is often misunderstood.
When you close a credit card, the account may remain on your credit report for up to 10 years if the account is positive, while negative items may come off your credit report sooner. As long as a closed credit card remains on your credit report, credit scoring models like FICO will include the account in your length of credit history calculations. So closing a credit card should not reduce your average age of credit — at least not for around a decade for positive accounts.
If your score goes down, it’s likely because the account closure caused your overall credit limit to decrease, which would cause your credit utilization rate to increase. Unless you have a good reason to close a credit card (such as avoiding an annual fee on an account that no longer benefits you or needing to close a joint account), it’s often best to keep credit cards open for as long as possible.
How to improve your length of credit history
For many people, improving length of credit history just requires patience. As the accounts on your credit report grow older and you avoid mistakes, your average age of credit should trend upward over time.
But there are a couple actions you can take that might benefit your length of credit history sooner rather than later:
- Become an authorized user: A friend or family member could add you on to a revolving credit card account as an authorized user. If the credit card issuer reports the account to the credit bureaus for both the primary account holder and authorized users (many do so), then the credit card and its associated history could show up on your credit report. Just be sure the rest of the account’s credit history — namely payment history and credit utilization — is positive before your loved one adds you to the account.
- Use alternative data: The utility bills, mobile phone bills and rent you pay each month may not appear on your credit report. But you could consider using a third-party service like Experian Boost to add eligible accounts to one or more of your credit reports. And if those eligible accounts show on your credit report that they were opened several years in the past, they might increase your length of credit history.
The bottom line
Earning good credit can benefit your financial life in many ways. So, it’s worth learning how to maximize your credit score in every area possible, including the length of credit history category. Even a seemingly minor credit score category has the potential to improve your overall credit score in a meaningful way.