LENGTH OF CREDIT HISTORY AND YOUR CREDIT SCORE
Posted on: Jul. 30, 2017 in Credit Score

Your credit score is made up of a number of factors including how much debt you have and your payment history. Those two things alone comprise about 65% of your score. The three other factors – length of credit history (15%), new credit (10%), and type of credit (10%) – tend to get far less attention but they still matter. Making up over one-third of your score, they are worth a thorough explanation.

Today, let’s take a closer look at credit history.

Length of credit history often gets confused with credit age. While they are similar, they are not exactly the same. Your length of credit history generally refers to one specific credit card or lender, whereas your credit age takes into account the average age of all of your accounts. Generally, the longer both of these are, the better your credit score will be. That is assuming, of course, that you have been paying on time and don’t have too much debt.

Why does it matter? Simple – the longer your history for using credit responsibly, the more likely it is you’ll continue to do so. Having a perfect credit history for a year is not nearly as attractive as a perfect one for five, ten, or twenty years.

A long credit history can also help if you do have a blemish or two on your record. Your overall payment history will highlight the patterns of payment, for good or for bad. And the longer ago a late payment was, the less it will affect you.

So, what can you do?

  • Don’t close old cards, even if you’re not using them anymore, unless they have an annual fee.
  • Some cards will become inactive and stop reporting to credit agencies if you don’t use them. Keep an eye on this and use your cards periodically to keep them active.
  • If you’re young, see if someone will add you as an authorized user on an account they’ve had open for a long time that has no late payments on it. This will bump your score up slightly until you’ve built up a history on your own.

As long as you use credit reasonably and don’t accumulate too much debt, your score will benefit from those old credit accounts!

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