Things You Should Know About Credit History

One component of your credit score is your credit history, also known as credit age. The longer history of consistently paying bills on time that you can show lenders, the better off you are.

Common Credit History Questions

Let’s answer some questions you might have about credit history, credit age, and how it impacts your credit score.

What Does Length of Credit History Mean?

Length of credit history refers to how long the accounts on your credit reports — from the credit bureaus Equifax, TransUnion, and Experian — have been open.

How is Credit History Calculated?

There are a few factors used to calculate your credit history:

• Age of your open and active credit accounts.
• The average age of all your accounts, how long your newest account has been open, and how long your oldest account has been open.
• Length of time since you’ve last used the open accounts on your report

What is the Credit Score Impact?

The older your credit history/credit age, the better it is for your score. Length of credit history is:

• 15% of FICO Score
• 21% VantageScore*

How Do Credit Mistakes Affect People With Younger Credit?

The short answer is that mistakes hit harder when your credit file is thin or young because there is not a lot of positive data to buffer the damage. The negative effects have a disproportionately larger impact on short credit age or younger credit files.

• Missing a Payment (Most Impactful). If you only have 1 or 2 accounts, a late payment could drop your score 80 – 100 points because there’s less positive payment history to offset it.
• High Utilization. If you only have one $500 credit card and you use $400, that’s 80% utilization. A credit file with more accounts and history can absorb the utilization hit better.
• Too Many New Accounts. A new account lowers the average age of credit and hits your credit with a hard credit inquiry. If your average age of credit is 1 year, adding a new account can cut that in half. This hurts your credit age.

Should I Leave Old Credit Cards Open or Close Them?

In general, it’s a good idea to leave credit cards open as long as possible. Yes, even the ones you don’t use. That’s because closing an account can lower your total available credit, which can hurt your score.

What to Do About Annual Fees

If the card you no longer use has an annual fee:

• You could cancel it so you don’t have to pay the fee. Your score may rebound fairly quickly.
• Keep your account open to boost your credit score and call the card issuer about waiving the fee or moving to a new card without a fee (but still maintaining your credit history).

What Matters Most for Thin Files?

If you have a thin, new, or young credit file, here are some of the things to prioritize to improve and maintain a strong credit age:

• Always make payments on time, always (set reminders and autopay)
• Keep credit utilization low
• Keep old accounts open and in good standing
• Be mindful about opening new accounts
• Try to limit credit inquiries

While the negative impact is greater for credit mistakes for younger credit files, the good news is that younger credit files also improve and recover faster.

*based on VantageScore 3.0