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

Adrian Zee

Dec 09, 2021 6 min read

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How Credit History Impacts Credit Scores
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    The length of credit history relates to how long any of your given credit accounts have been opened. These accounts include credit cards, lines of credit, and mortgages. The longer the length of your credit history, the greater the positive effect on your credit score

    Credit bureaus usually consider your credit history age to account for 15% of your score. So, if your credit history is relatively young, you can lean on other factors, such as a low credit utilization rate and a positive payment history, to drive up your credit score. 

    Why is Your Credit History Length Important?

    Lenders use credit history to predict your future behaviour. A good record with no late payments doesn't mean much if the length of your credit history is only one month. In contrast, a long history of good credit use can advocate that you'll continue to make payments on time and be a low-risk borrower. 

    However, a long credit history can't remedy a pattern of late and missed payments. 

    Credit Age vs. Credit History Length

    When lenders consider your credit history, they look at your oldest account, as well as the average age of your credit accounts. Credit history refers to how long any given account has been opened. A line of credit opened last year has an approximate credit history of one year. 

    In comparison, credit age is the average age of all your accounts. Suppose you have three credit cards — Card One is three years old, Card Two is five years old, and Card Three is one year old. If you have no other credit products, your credit age would be three years old because that's the average age of your three credit cards (three plus five plus one, divided by three). 

    What Factors Determine Credit History Length?

    Credit history length is the amount of time since you first opened a particular credit account. The age of your oldest account is a crucial factor to 15% of your credit score. That's why we always recommend keeping your oldest credit cards open to maintain the best score. 

    Occasional charges on your older cards can prevent an issuer from closing it for lack of use. Older cards lengthen your credit history and maintain your total available credit, which results in a lower credit utilization rate. 

    Closing an old card, therefore, would reduce your average credit age and the amount of available credit you have. Such actions could reflect poorly on your credit score. 

    Additionally, obtaining new credit products reduces your average credit age by adding a new account with zero credit history. 

    However, because your credit score doesn't significantly lean on credit history, opening new credit products won't severely hurt your credit score. It's better to focus on timely payments than to worry about signing up for a new line of credit. 

    You should try to avoid opening multiple new accounts all at once. Opening a handful of credit cards at the same time could force your average credit age to take a significant step back and negatively influence your credit score. The same idea applies to closing multiple old credit accounts with positive credit histories. 

    What Is a Good Average Age of Credit History?

    It's good to have credit cards and other accounts of varying ages. One or two older accounts can positively anchor your average credit age. 

    If your accounts have an average age of five years, you're generally in good shape (suggesting that there have been no other issues). Additionally, you can consider an average age of ten years to be a long history. 

    How Long Does a Credit History Have to be Before a Mortgage May be Obtained?

    It's challenging to purchase a home with little-to-no credit history, especially if you're looking for a mortgage at one of the major banks. However, if all else looks good, you should have an excellent chance at getting a mortgage with at least one year of credit history. 

    How Long Does a Credit History Have to be Before a Car Loan May be Obtained?

    Car loans don't require a lengthy credit history. They can be an excellent option to build credit as well. The length of credit history that a car loan requires ultimately depends on your financing. However, a year's worth of credit history is adequate for most types of financing. 

    How Long Does a Credit History Have to be Before a Credit Card May be Obtained?

    Credit cards are how you build your credit score and credit history. So, you can expect a credit card approval even if you don't have a credit history. Without any credit history, however, you might not be able to qualify for certain premium credit cards, like travel and rewards cards.

    What Can I Do to Enhance My Credit Score?

    A strong credit score is vital to obtain loans, a mortgage, and other credit accounts — especially if you're looking for a low-interest rate. Below are some methods to how you can enhance your score:

    • Go over best practices to improve credit history: Best practices such as paying bills on time, keeping your credit utilization rate low, and making more than minimum payments on credit cards can significantly improve your credit score.

    • Obtain a secured credit card: A secured credit card is backed by a security deposit paid by the owner. Unlike a debit card, regular use and timely payments can build your credit score. However, because secured cards require a deposit, it's significantly easier to be approved for a secured card than for an unsecured one. 

    • Become an authorized user of someone's credit card: Becoming an authorized user means having permission to use another person's credit card. However, the authorized user isn't legally responsible for footing the bill. The authorized user can potentially raise their credit score if the original cardholder makes timely payments. If the original cardholder is irresponsible with the card, however, it can also drag down the authorized user's score. 

    • Get a co-signer: Those with a low credit score may still qualify for credit cards and other loans if they can find a co-signer with good credit. This can allow someone with poor credit to obtain a loan or card that can help rebuild their score. 

    • Get a student loan or credit builder loan: A student loan or credit builder loan can help you build a positive payment history — the most important factor to good credit. It can also establish a credit history and contribute to your credit mix

    A lengthy credit history without significant issues can positively impact your credit score. Maintaining old credit accounts can enhance your credit history and age, and not opening multiple new accounts all at once can prevent a significant dip in your average credit age. 

    While credit history is essential, it's not the be-all and end-all. Responsible credit use, positive payment history, and a low credit utilization rate are much larger contributors to your overall score. 

    Adrian Zee
    Adrian Zee

    Adrian is a judicial law clerk and personal finance writer who breaks down complex personal finance topics into easy-to-consume articles. His work has been featured in the National Post and Apollo Magazine, along with other publications.

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