How the Length of Your Credit History Impacts Your Credit Score

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length of credit history

length of credit historyWhen you think of your credit score, chances are that you focus on items like payment history and credit utilization. While these are the two most important aspects of your credit score, there are other factors that influence your financial reputation. One of those factors is your credit history.

Why your credit history matters

The length of your credit history accounts for about 15 percent of your credit score. The length of your history is often expressed in two different ways:

Age of oldest account: How old is your oldest account? The longer you’ve had credit, the better your score will be.

Average age of your accounts: With this measure, the ages of your accounts are added up and then divided by the number of accounts you have. Once again, the higher the average age of your credit, the better your score will be.

Even though this isn’t the largest chunk of your credit score, it’s still fairly significant. If you have a very low length of credit history, it could tip the scales against you. If your score range is at the lower end of “good,” having a short credit history could nudge lower, into “fair” territory — and result in increased costs on your next loan.

Be careful when you cancel credit cards

Credit history length is one reason to be careful when you cancel a credit card. Say you have five loans of different ages:

– Five years
– Two years
– Eight years
– Six years
– One year

The average age of these loans is almost four and a half years. If you decide to cancel the credit card you’ve had for eight years, though, the story changes. Now the average age is about three and a half years. The difference is more pronounced as you move forward, however. If you know you will apply for a major loan, such as for a home or a car, in the next couple of months, think twice about canceling a long-standing credit card account.

There’s a reason I still have my first credit card from college. That credit card account is 14 years old. No, it doesn’t have any rewards attached to it. But that credit card account, along with a not-very-great cashback credit card my husband and I got 12 years ago shortly after marrying, brings up my “average” credit account age.

Of course, if you have serious issues with paying your bill on time, or if you have several maxed out credit cards, a long credit history isn’t going to solve your credit score problems. However, if you have a decent credit score, and you hope to give it a bit of a boost, paying attention to the length of your credit history can be a big help.

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