Length of Credit History — Why It Matters and How It Impacts Your Credit Scores

Length of credit history

By Michelle L. Black

Your credit scores play an important role in your financial life. Good credit can open the door to financing opportunities, lower interest rates, and money saved on insurance premiums.

On the other hand, bad credit can make it difficult to qualify for the things you need and want — at least at an affordable rate.

Because your credit matters so much, it’s smart to pay attention to anything that affects your credit score. The length of your credit history falls into that category and is worth 15% of your FICO Score.

VantageScore scoring models consider your length of credit history too. Your age and type of credit combined are “highly influential” over your VantageScore credit score.

Keep reading for a deeper look at what credit scoring models consider when it comes to the length of your credit history.

In this article

What is length of credit history?

Credit history is a term that describes the bulk of the information you can find on your credit report. It includes a record of your credit obligations, your payment history, your balances (current and sometimes past), and more.

Length of credit history measures how long your credit history has been established. According to FICO, it’s a broad term that covers factors such as:

  • The average age of the accounts on your credit report
  • When you opened your newest credit account
  • The age of the oldest account on your credit report
  • How long ago you opened individual accounts
  • The length of time since you last used the accounts on your credit report

How length of credit history can impact your credit score

Length of credit history is one of the five major credit score categories. But credit scoring models don’t consider your personal age when they calculate your credit score. Rather, it’s the age of the accounts on appearing on your credit report that matters.

Having older accounts is better than having younger ones where your credit score is concerned. According to FICO, a longer credit history always impacts your credit score in a positive way.

From a lender’s point of view, there’s a big difference between someone who is new to credit and someone who has a track record of managing credit obligations for many years.

The person who is new to credit is more of an unknown risk. It’s harder for lenders to predict the risk of doing business with that person.

Are you wondering just how old your credit history needs to be in order to achieve excellent credit scores? You may be pleasantly surprised.

In a FICO Score “High Achievers” study, people with a FICO Score ranging from 800-850 had an average length of credit history of 99-128 months (around 8-11 years).

A good score, defined as a FICO Score of 670–739, may be achievable in a far shorter time frame.

How to increase your length of credit history

There are many positive steps you can take to try to build or improve different aspects of your credit score. When it comes to length of credit history, your options can be a bit more limited.

Still, there are two potential ways you may be able to boost your credit within this category.

1 - Establish positive accounts and wait

It’s important to establish credit in order to have the opportunity to build your length of credit history and your credit score.

There’s just one problem. When your credit reports are blank slates (or they only contain negative accounts), it can be difficult to find banks or lenders that are willing to approve your application for a new account.

Yet qualifying for new accounts isn’t impossible when you have poor credit or no credit. You just need to be strategic and apply for accounts with lenders who are more likely to approve you despite your credit challenges.

If you want to build or rebuild your credit, the following types of accounts may be a good place to start.

A credit builder loan

A credit builder loan is a type of small installment loan. Basically:

  1. A lender holds your loan proceeds in a Certificate of Deposit (CD) or savings account instead of issuing you the funds outright.
  2. You make payments to the lender over a period of time (perhaps 6-12 months).
  3. Often, the lender will report your account and payment history to the three credit reporting agencies — Equifax, TransUnion, and Experian. Just be sure to verify the lender’s credit reporting policy before you apply.
  4. Once you make your final payment, the lender should release your loan proceeds to you, minus any fees and interest.

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Secured Credit Card

With a secured credit card, you make a deposit with the credit card issuer that is typically equal to your credit limit on the account. For example, if you deposit $500 you may qualify for a secured credit card with a $500 limit.

Often, the card issuer will report the account to the credit reporting agencies each month. (Verify this fact to be sure.)

If you manage the account well with on-time payments and a low credit utilization, it may help you build better credit scores in the long run.

Once you open the right mixture of account types, you generally have to be patient and wait.

Your length of credit history will grow older with the passage of time and, if you manage your accounts well, your score may trend upward as well.

2 - Consider the authorized user strategy

Sometimes it’s possible to get a head start where the length of your credit history is concerned. You can ask a loved one to add you as an authorized user onto an existing credit card account — preferably one that has been open for several years.

If a relative or friend adds you onto an older credit card that has been managed responsibly (i.e. on-time payments and low credit utilization ratio), it might increase your average age of accounts or even the age of the oldest account on your credit report.

There’s a chance the account could help your credit score if and when the credit card appears on your credit report.

Not sure if the card will appear on your credit report? Ask the card issuer about their policies for reporting authorized users to the credit bureaus, as well as which bureaus they report to.

Mistakes that could hurt your length of credit history

Knowing which mistakes to avoid is just as important as knowing what you should do where your credit score is concerned. Certain mistakes could lower your average age of credit and might lead to a lower credit score by extension.

The biggest misstep you want to avoid in this credit score category is opening too many accounts in a short period of time.

If you’re building credit for the first time, opening several new accounts at once may be beneficial to your long term plan. Yet once your credit is established, it’s better to spread out credit applications over time.

Each time you open a new account, you risk lowering your average age of credit. You also reset the clock on the age of your youngest accounts. Either of these actions might have a negative impact on your credit score.

On a positive note, as you show over time that you can manage your new account well, any negative score impact will decrease.

How closing a credit card affects your length of credit history

Exercise caution anytime you consider closing a credit card account.

Canceling a card will not automatically lower your average age of credit as some believe. But the account closure could damage your credit score for another reason – it might increase your credit utilization ratio.

FICO confirms that closing a credit card won’t have an immediate impact on your length of credit history. The closed account will still remain on your credit report.

A related myth holds that closing a credit card account shortens a person’s length of credit history, thereby hurting the FICO® Score.

That notion is incorrect too. The FICO Score considers the age of both open and closed accounts.

As long as the account appears on your report then, closed or open, it will count toward your average age of credit.

Of course, closed accounts don’t remain on your credit report forever. The credit bureaus remove most negative accounts from your credit report after around seven years. They remove positive, closed accounts after ten years.

Once an account drops off your credit report, scoring models will no longer consider the age of the account or any other account details, for that matter.

If the account removal results in a lower average age of credit at that time, your credit score might dip downward.

Moving forward

Learning how different actions, like opening new accounts, can affect your credit score is an important key to earning and maintaining a good credit rating.

In addition to understanding how credit scores work, it’s also critical to monitor all three of your credit reports for accuracy.

You can check your credit report for free once every 12 months thanks to the Fair Credit Reporting Act. Your free reports are available at AnnualCreditReport.com.

Keeping a close eye on your credit reports can help you in several ways.

First, you can monitor your credit reports for errors and fraud which, unfortunately, do happen. Reviewing your reports often can also keep you focused on the smart steps you need to take to keep your credit in the best shape possible.

About the author

Michelle L. Black is a leading credit expert with over 17 years of experience in the credit industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting and debt eradication.

Written on June 2, 2020

Self is a venture-backed startup that helps people build credit and savings.
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Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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