There are many factors that go into creating your credit score. The age of your credit history is one such factor, and it may make a big difference in your credit score in some cases.
However, there are a number of other things to consider here, and it is important to understand that each case is slightly different.
Additionally, good credit scores can take a bit of time. Because there are so many factors that go into calculating your score, it takes well-established healthy credit habits to truly shine on your credit score.
Patience and persistence pay off here, as credit age can count for up to 15 percent of your credit score, and obviously a long history of good practices looks much better than a long history of inconsistency.
What does age of credit history mean?
When you hear the term “age of credit history” it simply means how long you have had credit. The major credit scoring models such as FICO and Vantage point look at how long you have had credit as a part of determining the impact of your credit history on your scores.
Other factors go into this. For instance, they will look at the age of your oldest account, the age of your newest account, and then the average age of all your accounts together. This helps give a better picture of your true established credit history.
Why does the age of your credit history matter?
The age of your credit history is important, as it may be a signal to lenders about how experienced you are with credit.
A longer history suggests that you are experienced with credit, and therefore may be better at handling and paying off your credit. This is only one piece of the puzzle, however. Other factors they consider include:
Credit utilization ratio
How much new credit or accounts you have applied for
Amount of current unpaid debt
The types of credit you have
Your credit age along with these other factors lets lenders know you will pay back a loan on time, and are therefore more likely to get a loan with favorable terms.
While the age of your credit history is important, other factors weigh much more when considering your credit score.
For instance, your payment history makes up a large percentage of your credit score which may even outweigh a long history of credit. If you have a long history of credit, but that history is marked with late payments, missed payments, or charged off accounts, then it may not matter how old your credit history is.
However, the opposite is also true. If you only have a very short credit history, you may not be eligible for many loans, even if you make payments on time.
Ideally, you will have a long history of making payments on time without using too much of your available credit.
When will you notice the age of your credit history changing your scores?
When you first get a credit account, you will have no credit score. It generally takes around 6 months of having an active credit account to create a credit score.
From there, everything that is recorded by the lender and sent to the bureau will show up on the report and affect your score.
As you continue to make payments on time and take out a few different types of credit, you should notice your credit score greatly improve.
However, there is no set time, as each case is going to vary and there are too many factors going in to creating a credit report. At first, it is best to simply focus on creating healthy credit habits and let the credit score take care of itself.
The age of your credit history does affect your credit scores, so you may want to consider how you will be affected before opening new accounts or closing off old ones.
However, other factors, such as payment history and credit utilization, are much more important than history. Together, these two factors account for over half of your total credit score
If you are looking to start, establish, or maintain a good credit score, focus on paying your bills on time and reducing your overall debt. Make a habit of these practices and with time, the age of credit history will take care of itself.