How Does the Length of Your Credit History Affect Credit Score?

August 16, 2021

The length of your credit history boils down to how long you’ve been using credit. Your credit history could have started when you opened your first credit card or line of credit, or took out your first loan.

It only grows with time, given your credit history begins from the first time that you borrow money and there is no way to go back in time and change that. This makes it difficult to improve your credit history length unless you’re also improving other aspects of your credit score at the same time.

How Is Credit History Length Calculated?

According to Experian, one of the three main credit bureaus in the U.S., credit scoring models use a variety of factors to calculate length of credit history. First, they account for the average age of your credit accounts. Average age of accounts (AAOA) is calculated by adding the monthly ages of all of your credit accounts and dividing by the total number of accounts on your credit report. If you request a copy of your credit report from a credit bureau, some automatically include the average age of your accounts.

The length of your credit history also depends on the age of your oldest and newest accounts, which can also be found on your credit report.

Why Is the Length of Your Credit History Important?

Lenders look at your entire credit landscape when considering you for a loan; the length of time that you’ve had open credit accounts is important because they want to see that you have a long history of responsible borrowing.

As a borrower, you carry inherent risk for lenders, so they look to your credit history to decide whether you are reliable and someone worth loaning money to. Do you pay your bills on time? Do you keep your credit utilization in check in relation to your entire credit limit? The longer that your credit history is and the more responsible that you are, the more willing they will be to offer you a loan.

The role that credit history plays in your credit score can make it difficult for younger people and people without a score to secure a loan or get a credit card. Without a credit history, a lender or credit card company is not able to tell what kind of borrower you are. However, it does not make it impossible to start borrowing.

How Does Credit History Length Affect Your Score?

The length of your credit history is not the single most important factor of your credit score; there are a couple of things that have a far larger impact. However, credit history length still plays a part.

In the most commonly used credit scoring model, FICO Score, the length of your credit history falls near the middle in terms of how much it affects your score. Accounting for 15% of your score, credit history length is valued less than payment history and credit utilization, but more than credit mix and new credit.

There are five factors that affect your credit score: payment history, credit utilization, credit history length, credit mix, and new credit.

For VantageScore, it is deemed “less influential” than total credit usage, balances, available credit, credit mix and experience, and payment history, but more than new accounts opened.

Generally, the longer that your credit history is, the more positively it will affect your credit score.

A credit account won’t appear on your credit report and affect your credit score immediately after you’ve opened it. Generally, new accounts won’t be reported to the bureaus until after the first billing cycle. Experian suggests that you give new accounts 3–6 months to affect your score.

Even closed accounts can remain on your credit report and affect your score for up to 10 years, depending on the credit scoring model and the type of account that has been closed. For instance, your FICO Score may include both open and closed accounts regardless of whether a loan has been paid off or a credit card has been closed, whereas your VantageScore may remove accounts that have been closed. In some cases, this could lower your score, as it would rely more heavily on fewer and newer accounts.

How Can You Improve Your Credit History Length?

Unfortunately, there is no easy way to lengthen your credit history — it all depends on when you opened your first account. Given there is no way to go back in time and open an account earlier, you only have so much to work with.

The best way to improve your credit history is to start working on it as soon as possible, make on-time payments, and maintain a steady credit utilization ratio to see a bump in your score. There are also a few other things that you can do to ensure that you’re maximizing your credit history potential to maintain a good credit score.

Don’t close accounts

Unless you are paying off a loan or need to close a credit card to curb excessive spending, your score could benefit from keeping your credit accounts open and allowing them to age. If you struggle with spending, consider putting your credit card to the side or only using it for groceries and gas so you don’t feel tempted to make large, unnecessary purchases that you won’t be able to pay back.

Start with low-risk, manageable credit accounts

Credit-booster loans, secured credit cards or loans, low-limit cards — all are great ways to kickstart your credit history. It can be difficult for younger people or people with no credit to build their history, but it’s important to start somewhere. By starting with simple loans and other types of credit accounts, you can prove your credit worthiness and ability to repay balances and debts. This will help you land bigger loans and better credit cards in the long run.

Become an authorized user

This is not an option for everyone, but being added to a trusted, responsible individual’s credit account can actually boost your own credit score. If you’re added as an authorized user and both you and the person use credit responsibly and make on-time payments, you will both start to see an increase in your scores.

When taking this route, check with the lender or credit card company to make sure that they report account information on authorized users other than the account holder — some lenders do not.

Don’t open a ton of new accounts

You may think that opening several new accounts and allowing them to age is the best thing that you can do for your credit history, but it could actually cause more damage to your credit score in the short term than you bargained for. New accounts will lower your average age, and it could be several years before you start to see that positively affect your score.

Credit history is all about balance. If you have access to a good credit card with low interest rates and decent perks, that might be a deal worth going for. The account will eventually age, and if you’ve made consistent, on-time payments, you’ll start to see it affect your score in a positive way.

But you should also remember that the age of your credit score isn’t the most important thing that you can do to boost your score. Don’t worry about continuously adding accounts to your file. You’d see far greater benefits by sticking to fewer accounts and managing them properly than overloading on accounts and losing control of your finances.

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $13 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.

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