How Length of Credit History Affects Your Credit Score
Does the length of your credit history affect your credit score? You bet. And it’s one of the biggest factors that affect your credit score.
CreditCards.com reports that individuals with excellent credit (over 750) have accounts with an average age of 11 years. Compare that to those with fair credit (between 650 and 699), who have accounts with an average age of about seven years, and you see just how important it is.
Why is the age of your accounts important in determining your credit score? We’ve got the answers for you.
What is Length of Credit History?
When you hear “length of credit history,” it refers to a few different factors. First, and likely most obviously, it merely refers to the age of all of your credit accounts. This is often why financial experts suggest that it’s a great idea for college students to sign up for a credit card, even if they don’t use it to the same extent that a working adult might.
So, your oldest account’s age is one factor that determines the length of your credit history. Then, credit scoring agencies will also look at the length of time since you opened your newest account. They’ll consider this along with the average age of all of your accounts.
Is it best to have an old account that you don’t use to ensure your length of credit history looks longer? It’s certainly a good idea to keep old accounts open to increase your credit limit and lower your credit utilization rate. However, having an old account that you don’t use at all hasn’t been shown to help your credit score that much. Use it once a month for gas or groceries at the very least, especially if you can earn rewards.
How Much Does Credit History Affect Your Credit Score?
Credit scores are different, and each comes with varying rubrics for calculating the score. FICO and VantageScore are the two most well-known, and they each assign a different weight to the importance of your credit history.
For example, with FICO, the length of your credit history accounts for 15% of your credit score. VantageScore (the one we use here at Float), combines the length of your credit history with the types of credit into one big factor that makes up 30% of your credit score.
According to VantageScore, the most influential factor is your credit usage, balance, and available credit. The next most influential factor, which they rank as “highly influential, is your credit mix and experience.
Tips for Optimizing Your Credit History
If you’re trying to get the perfect credit score, there are quite a few things you can do to help you achieve your financial goal as it relates to the length of your credit history.
Don’t Close Old Accounts
This helps your credit utilization ratio as it ensures that your overall credit limit remains high. It also adds to your accounts’ average age, which boosts the portion of your credit score tied to your credit age and history. But, be sure to make small charges and payments to those accounts. Having an old account open that you don’t use doesn’t help your score.
Think Before You Consolidate a Loan
If you have student loans, for example, and consolidate them all into one loan, the average age of your accounts will go down as the new loan date will start over. This affects your length of credit history, especially if you don’t have many other credit accounts.
Don’t Open New Accounts Unless Necessary
Applying for a new credit card counts as a hard inquiry depending on the application, and that can hurt your credit score. That doesn’t mean it’s never a good idea, just that you should only consider adding new lines of credit and accounts if necessary. Every time you open a new account, that account decreases your overall length of credit history. And, that’ll cause a dip in your credit score.
Keep Track of Your Credit Score
If you’re thinking about how your credit history’s length affects your credit score, then chances are you’re trying to improve it, right? We can help you with that.
At Float, we’re dedicated to helping you track your credit score, but we want to do more than just that. We want to arm you with financial tips and tricks along with the ability to share your score with others close to you.
Choose how much or how little you share with your Float circle of friends as you celebrate in their wins, share yours, and work towards a healthier financial future. Ready to start optimizing your financial health? Download Float today.