However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money. A long track record without any major slip-ups suggests that your credit behavior will be similar in the future — and lenders and credit card issuers like that.
The "length of credit history" means how long any given account has been reported open, says Rod Griffin, senior director of public education for Experian, one of the three major credit bureaus. The credit scoring algorithms calculate the average of how long all your accounts have been open. While credit age matters for credit scoring purposes, the only thing you can do about it is to keep your credit accounts in good standing and avoid closing credit cards unnecessarily. Our goal is to give you the best advice to help you make smart personal finance decisions.
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In the formulas that determine a credit score, how long you have had credit may seem to be a somewhat minor factor. That statement certainly sounds true for the FICO score, which counts this portion as 15 percent of your overall score. This is just what it sounds like—over how long a period have you had credit? According to myFICO , there are three factors at play here. First, it averages the age of all your accounts by looking at how long each of your credit accounts have been open, targeting especially the age of your oldest and newest accounts.
Second, it examines how long each specific account has been open. Third, it looks at when the account was last used. Of course, those with negative marks such as missed payments or collection items will stay as well and can hurt your score, but not quite as long. These negative accounts will disappear from your credit report after seven years.
While there is no hard and fast answer to this question, seven years seems to be a magic number when it comes to credit scoring. As previously noted, it takes seven years for negative information to fall off of your credit report. However, you can get a great credit score in a lot less than seven years. Those new to credit can get a FICO score once an account is about six months old and its payment history has been updated at least once; it takes even less time to get a VantageScore this can happen within a month or two of opening an account.
Your payment history and credit utilization ratio have a greater impact on your scores than the age of your credit accounts. On the other hand, if you have a long history of on-time payments and a low credit utilization ratio, it shows you know how to responsibly manage credit and are a good risk to lenders — meaning you could be more likely to be approved for credit cards and loans. No matter the scoring model, there are some keys to having higher credit scores. Your bank or other financial institution wants you to pay back what you borrow.
Your account mix , or the types of credit accounts you have, may be a factor in determining your credit scores. Lenders generally like to see that you have a history of making on-time payments on a variety of credit accounts rather than just one type. So a mix of credit cards, plus other loans — like auto loans, student loans or mortgages — may help you build your credit scores.
Hard and soft inquiries happen when you apply for new credit accounts, or sometimes when you set up utilities or rent an apartment. Hard inquiries typically stay on your credit reports for two years. In general, you need to have at least one account open that has been reporting to the credit bureaus for six months to have enough information to generate a credit score.
You can continue to build your credit history by paying your bills on time and establishing a mix of credit accounts that includes installment loans like a student loan or mortgage and revolving lines of credit like a credit card or home equity lines of credit. You could also become an authorized user on an account where someone has a long-established credit history.
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