Does Length of Credit History Affect Your Credit Score?
Harrison Pierce is a writer and a digital nomad, specializing in personal finance with a focus on credit cards. He is a graduate of the University of North Carolina at Chapel Hill with a major in sociology and is currently traveling the world.Read full bio
At a Glance
Generally speaking, the longer you’ve had credit accounts open and in good standing, the better it is for your score. This is because it shows that lenders have been willing to trust you with credit over an extended period. Of course, other factors like payment history and credit utilization also play a role in your overall score. Still, it’s always a good idea to view your credit history as a long-term relationship rather than a short-term fling.
In this article, you’ll learn:
Months Is the average length of credit for people with excellent credit scores (above 800 on the FICO model.)
What is length of credit history?
The length of credit history refers to the amount of time a person has been using credit. It measures how long a person has had credit accounts open and how often they have used those accounts to borrow money and repay it on time. Typically, credit reporting agencies use the length of credit history as a factor in determining a person’s credit score, with a longer credit history being viewed as a positive factor. A person with a longer credit history may be seen as more responsible and reliable in managing their credit and, therefore, may be more likely to be approved for loans or credit cards.
How is length of credit history calculated?
The length of credit history is calculated based on the amount of time that a person has had credit accounts open. Each credit account a person has is associated with a specific date it was opened. Credit reporting agencies use these dates to calculate the length of a person’s credit history.
The calculation will depend on the credit scoring model but might take the average age of all of a person’s credit accounts or look at how long their oldest account has been open. For example, if a person has three credit accounts with ages of two years, five years, and seven years, then the average age of their credit accounts would be 4.7 years (i.e., the sum of the ages divided by the number of accounts).
It’s important to note that the length of credit history calculation doesn’t consider periods when a person didn’t have any credit accounts open. So, for example, if a person had a credit account open for five years, closed it for two years, and then opened a new account, the length of their credit history would be five years, not seven years.
How does length of credit history affect your credit score?
Credit scoring models typically consider both the age of your oldest credit account and the average age of all your credit accounts when calculating your credit score. Generally, the longer your credit history, the higher your score will be, as long as you have a history of using credit responsibly.
If you have a shorter credit history, it may be more challenging to get approved for loans or credit cards, as lenders and credit scoring models may view you as more of a risk. However, other factors can also impact your credit score, like your payment history, credit utilization, and the types of credit accounts you have, so it’s important to maintain a good credit history across all of these factors to maximize your credit score.
What is a good credit history length?
There is no single answer to what constitutes a “good” credit history length, as different lenders and credit scoring models may have different criteria and weightings for this factor. However, generally, a credit history of at least seven years is often considered a good length of time, as it provides a significant amount of data to help lenders and credit scoring models assess your creditworthiness.
That being said, having a longer credit history can be even better, as it demonstrates a longer track record of responsible credit management. For example, if you have a credit history of 10 or 15 years, this may be viewed even more favorably by lenders and credit scoring models.
How to improve your length of credit history?
The length of credit history is based on the amount of time that you have been using credit, so there are no shortcuts to improving it. However, there are some steps you can take to help establish a longer credit history over time:
- Keep your credit accounts open: The longer you keep your credit accounts open, the longer your credit history will be. So, if you have older credit accounts that you don’t use much, consider keeping them open rather than closing them.
- Use your credit accounts responsibly: Your credit history is also based on how often and how responsibly you use credit. Make sure to use your credit accounts regularly and make on-time payments to demonstrate your creditworthiness.
- Apply for new credit accounts strategically: When you apply for new credit accounts, it can temporarily lower your credit score. So, avoid applying for too much credit at once, and be selective about the types of credit accounts you apply for.
- Consider becoming an authorized user: If you have a friend or family member with a long and positive credit history, you may be able to improve your own credit history by becoming an authorized user on one of their credit accounts. This allows you to benefit from their positive credit history without having to open a new account on your own.
Remember that building a longer credit history takes time, so it’s important to be patient and diligent in your efforts. By using credit responsibly and making timely payments, you can gradually establish a longer and more positive credit history over time.
Length of credit history vs. credit age
In general, length of credit history refers to the total length of time you’ve had credit accounts open, while “credit age” typically refers to the average age of your credit accounts. If you have one credit account that is 10-years-old but opened your other four accounts within the last year, your credit age will be low, but your length of credit history will remain high. However, these terms are often used interchangeably. The most important thing is that you keep your accounts open and in good standing.
If you close your oldest credit account, it can reduce your credit age and length of credit history and potentially lower your credit score. It can also affect your credit utilization ratio, which is the amount of credit you are using compared to the total amount of credit available to you. If you close an account with a high credit limit, it can reduce your available credit and increase your credit utilization ratio, which can negatively impact your credit score.
Building a positive credit history when you have no credit history can be challenging. However, there are several steps you can take to establish a positive credit history. You can open a secured credit card, become an authorized user on someone else’s credit account, take out a credit-builder loan, or report your rent and utility payments to credit bureaus to help establish a positive payment history.
You also need to monitor your credit score regularly to ensure that your credit accounts are being reported accurately and to catch any errors or fraudulent activity early on. Remember, building a positive credit history takes time, so be patient, use credit responsibly, and make timely payments to gradually establish a strong and positive credit history over time.
Your credit history is a record of all the credit accounts you have opened, including credit cards, loans, and other types of credit. It shows the dates you opened each account, your credit limits or loan amounts, and your payment history on each account. Your credit history also includes information about any collections or other negative information, as well as the age of your oldest and newest credit accounts.
On the other hand, your payment history specifically refers to your record of making payments on your credit accounts. It shows whether you have made your payments on time, whether you have missed any payments, and whether you have ever been delinquent or gone into collections. Your payment history is a key factor in determining your credit score, as it provides a clear picture of your creditworthiness and your ability to manage credit responsibly.