Impact of Credit History Length on Credit Scores

If you’re on a mission to improve your credit score (or you’re trying to build good credit for the first time), you might have come across the term “length of credit history.” The length of your credit history accounts for 15% of your FICO score, so it’s not something you should ignore.

But what does length of credit history mean? And why does length of credit history matter? In this article, we’ll take a closer look.

The impact of your length of credit history

The length of your credit history is one of five weighted factors used to calculate your FICO score:

• Payment History: 35%
• Credit Utilization: 30%
• Length of Credit History: 15%
• Credit Mix: 10%
• Amount of New Credit: 10%

Your length of credit history isn’t the most important factor, but it’s important enough that a short credit history can stop you from achieving good credit.

You might wonder: Why does length of credit history matter? The short answer is that lenders want to see that you can successfully manage your credit over time. If you have extensive experience managing your credit and have done so successfully, lenders will probably see you as someone who’s safe to lend to. 

It’s a lot like a hiring manager assessing candidates. With all else being equal, a hiring manager is more likely to choose someone with 15 years of experience in the field over someone with two years of experience.

Similarly, a longer credit age also shows that you can successfully manage credit over time. A shorter credit age may mean you’ve applied for lots of credit recently, and that can be a red flag for lenders.

Here’s an example of a scenario where credit age can offer insights that the length of credit history cannot. Imagine that your credit report shows the following credit accounts and ages:

• Credit Card 1: 20 years
• Credit Card 2: 15 years
• Credit Card 3: 2 years
• Credit Card 4: 1 year
• Credit Card 5: 1 year
• Credit Card 6: 1 year

Based on this information, the length of your credit history is 20 years, which looks good to lenders. However, because you’ve opened several accounts in the past few years, your average credit age is only about seven years. Opening multiple accounts in a short period of time suggests that you may be experiencing financial instability, which is a red flag for lenders.

What does length of credit history mean?

Before they agree to extend credit to you, lenders want to look at your length of credit history, meaning the total length of time you’ve used credit. Your credit history starts when you open your first loan, credit card, or other credit account.

However, some lenders also want to look at a related metric called “credit age.” Your credit age typically refers to the average length of time all accounts have been open.

How is length of credit history calculated?

Calculating your length of credit history is simple. You just need to look at the age of your oldest credit account. When evaluating applications for credit, lenders will also often look at the age of your newest credit account and the average age of all your credit accounts.

Conclusion

If you have a limited credit history or no credit history at all, it may be difficult to qualify for credit cards, loans, and other credit-building products. That’s where we come in. Kikoff was designed to help everyone build credit. 

We don’t check your credit history when you apply, and if you’re approved, you gain access to a small credit line. You make interest-free payments, and we report those payments to all three credit bureaus. 

If you want to start building your credit history the right way, get started with us today!