Like fine wine, whiskey and cheese, most credit histories only get better with age. Although the length of your credit history only accounts for 15% of your FICO® Score, it’s still an important influence on lenders. It can definitely impact the chances of whether or not you get a loan.
Even some people who haven’t had credit for a considerable length of time can still have a high FICO Score if the rest of their credit report looks good. A longer credit history will always have a positive effect on FICO Scores.
When it comes to length of credit history, your FICO Scores take three things into account:
How long your credit accounts have been open including the age of your oldest account, the age of your newest account, and an average age of all your accounts.
How long specific credit accounts have been open.
How long it has been since the account has been used.
You can find all three items on your credit report.
The big catch-22 of growing your FICO Score is that you need credit to get credit, and it’s difficult to open lines of credit to build your FICO Score if you don’t have a good FICO Score. Fear not. You can absolutely do some things to help grow the length of your credit history. Here are a few to get you started.
First, apply for a secured credit card. A secured card is a card where you provide cash collateral for the line of credit. FICO Scores look at secured cards the same as any credit card. Most banks and lending institutions not only offer secured cards, but most also report secured card activity to the credit bureaus.
Second, see if you can get a friend or family member with good credit to be a co-applicant with you – this will help you establish your credit history. Or, see if they are willing to authorize you on their card. It’s a lot to ask, but if they’re willing, it’s a good way to start growing your credit history.
Finally, adopt a mindset where you see the length of your credit history as part of your greater long-term credit strategy. Use your card, but keep the balances low and pay on time. If you do, you’ll find yourself well on the road to building a strong credit history that you can put to work when you need credit.
You may be tempted to shut down that credit card that you just paid off after years of making payments. Before you do, take a moment to consider what impact closing that account may have on your length of credit history.
Next you should read about credit mix and how that factors into your FICO Score.