How Length of Credit History Impacts Your Credit Score and Financing Options

I was recently surprised when I learned my credit history wasn’t long enough to get top marks from FICO. I’m well past the spring chicken stage, and I thought my account history stretched back decades. 

Looking closer, though, I see I have been switching credit cards so frequently that my oldest open account is only about five years old, falling short of the seven- to 10-year sweet spot. So it turns out that my history is not as long as I thought!

Length of credit history refers to how long you have had credit accounts open and how long each has been in active use.

Quite simply, your credit history reflects how long you’ve been borrowing money and how well you have handled it. I’ll discuss how your credit history influences your credit score, what it means for your chances of winning over lenders, and the things you can do over time to build a good credit history.

It’s mighty important to know how the length of your credit history impacts your credit score. Lenders like to see a good, long track record because it shows you’ve been responsible with your borrowing over time. A longer history gives them confidence, while a short one causes them to hesitate, wondering if you can handle the load.

FICO vs. VantageScore 

Both FICO and VantageScore take into account the length of your credit history; they just go about it a little bit differently. FICO looks closely at how long you have had your oldest account, the average age of all your accounts, and how recently you have used credit. The longer and steadier your history is, the better off you are.

FICO vs. VantageScore Factors

With FICO, the length of your credit history comprises about 15% of your score, so it’s a solid chunk that can sway things. VantageScore handles it a little differently by lumping age and type of credit into a single factor, which gets about 20% of the weight.

But since that encompasses both how old your accounts are and what kinds of credit you’ve got, it’s not clear exactly how much weight goes to just the length alone. 

In both cases, the longer you have a credit history, the better it is. The older your accounts and the longer they have been in good standing, the more creditworthy you look, regardless of which score lenders use.

So, you might as well keep those old accounts open, as they’re worth their weight in gold!

The Impact of a Longer Credit History

The longer the credit history, the more it is like a well-worn path — steady and predictable. It proves to the lender that over perhaps a very extensive period, you do indeed borrow and pay back money and thus have earned some trust.

In other words, the longer you have had credit, the more confident the lender is that you know what you are doing with your finances.

That usually gives your credit score a nice boost since a longer credit history evidences stability. Lenders consider you and think, “This fella has been around the block, and they’ve handled things just fine.” It’s one of the key factors in helping you get those lower interest rates and better loan terms.

A long credit history is a signal to lenders that you’re not new to the game, therefore giving them more reason to trust you with more credit.

The older your accounts are, the better your average account age. You see, credit scoring models — including FICO and VantageScore — both consider this in determining your credit score. 

The Challenges of a Short Credit History

A short credit history is like trying to plow a field with an ornery mule; it’s tricky. Lenders have little to go on, so they have to guess if you will be a reliable credit user over the long term. Without a long track record, it is harder for them to trust you with bigger loans or better terms. 

When building credit, it takes time to get the ball rolling. You have to create a solid history, and that just doesn’t happen overnight. The thing to do is start young, keep those accounts open, and show them you can handle your credit like a pro.

When it comes to getting a loan or credit card, the length of your credit history is the bread and butter that lenders feast on. They want to make sure you have been around the block several times and have handled your debts with care. 

A longer credit history can open the door to better approval chances and more reasonable rates. At the same time, a short one could leave them feeling dazed and confused.

How Lenders View Your Credit History Length 

Lenders don’t just glance at your credit history; they take a good, long look. A long history tells them you’ve been borrowing and paying back for years, like a seasoned logger who’s been cutting down and replanting trees for decades. 

Just like they’d fret about hitching their wagon to a horse they’ve never seen run, lenders get nervous when your credit history is short. They can’t tell whether you can keep up the pace or fall behind when things get tough. It’s like trusting a rich Manhattan lawyer to suddenly buy and run a farm without a day of experience.

Lenders rely heavily on the age of your accounts. If you have been opening new ones like a squirrel chasing nuts, it is going to make your credit profile look young (as I found out!). Hang on to the old accounts because that gives the history some depth and will show you’re in it for the long haul.

Potential Effect on Interest Rates and Terms

The length of your credit history has a big-time impact on the interest rates you get. A long and steady history gives lenders hope that you are as reliable as the sunrise and will reward you with lower interest rates. 

However, a short history is considered a high risk, and lenders will charge you for that risk via higher rates. It’s like when a long-time customer at the feed store gets to buy alfalfa seed on credit with no questions asked, but new customers have to pay upfront because they haven’t proven they’ll settle up when the bill comes due.

Generally, short credit histories tend to mean stricter loan terms. Lenders might offer you less money, shorter payback periods, or toss in some extra conditions to cover their hides. With a long credit history, you may be able to stretch out your terms, get more money, and cut a better deal.

Improving Short Credit History When Applying for Loans

Well, even if your credit history is shorter than a pig’s tail, there are ways to improve your outlook when you apply for loans. You need to show lenders that although your track record isn’t long, you still are a good bet.

Here are some handy tips:

• Keep Your Accounts Open: The easiest way to develop credit history is just by keeping your old accounts open. The longer you have had an account in good standing, the better it looks, so don’t go closing those old cards just because they’re gathering dust. Try to use them at least once a year so that FICO doesn’t treat them as defunct.
• Use Credit Regularly, But Wisely: You must show lenders that you can manage credit and not mess it up. Make small purchases on your credit cards and pay those off on time. That keeps your credit alive and builds up your history without digging a hole.
• Avoid Opening Too Many New Accounts: Whenever you open a new account, you’re bringing down the average age of your credit history. Don’t go hog wild opening accounts. Stick with what you have to build up the average age of your accounts.
• Consider a Secured Credit Card: These cards are helpful to get started and any time your credit score needs a boost. Of course, all such cards require a deposit, which makes them easy to get. Otherwise, they work just like regular credit cards and report your payments to all three credit bureaus, building and extending your credit history as efficiently as possible.

You can make your short history stretch out with a few smart moves so that you look like a credit champ. Stick with it. Over time, lenders will be chasing after you like kids racing to the ice cream truck on a hot day.

Growing and maintaining a broader credit history doesn’t happen on its own. It takes time and a solid strategy, just like Dungeons and Dragons. The longer you manage credit well, the more creditworthy you look to lenders, and this helps you qualify for better loans and lower interest rates. 

Without a plan, you may find yourself closing accounts or having them sit idle, missing out on the benefits only an excellent, steady credit history yields.

Start Early with Credit

You want to be able to show lenders you have experience borrowing and paying back over an extended period, so the earlier you start, the better off you can be later on when applying for a loan or credit card.

Now, you can’t just open a credit account willy-nilly. Most accounts require you to be at least 18 years old. If you’re under 21, they’ll want to see proof of income or get someone to co-sign for you. But even with those restrictions, starting early is still a mighty fine idea.

If you’re just starting out, then student credit cards are a great way to build your history. If that’s something for which you don’t qualify, get a secured credit card. 

As mentioned earlier, secured cards are easy to get because you put down a deposit. They report to the major credit bureaus — Experian, Equifax, and TransUnion — just like an unsecured card, giving you a chance early on to show you can handle credit responsibly.

Keep Old Accounts Open

Once you’ve got some credit under your belt, keep those older accounts open. They’re seasoned workhorses, adding strength and stability to your profile. Lenders know that if you have had accounts open for a long time — and in good standing — it usually means you have been extremely responsible, which should boost your score.

Now, if you go and close one of those older accounts, it’s like shooting yourself in the foot. Ouch! The age of your accounts factors into the average length of your credit history, and when you close an old one, that average can drop faster than a shipment of TV sets off the back of a truck when nobody’s looking. That is, the longer your average account age, the more trustworthy you look to lenders.

So, even if you aren’t using that old credit card much, keep it open if it’s not costing an annual fee. Like an old tool in the shed, you may not need it every day, but it surely is nice to have when the time comes.

The Benefits of Consistent Credit Use 

Using your credit regularly is like working out in the gym — that’s where consistent effort gets the best results.

• Higher credit scores: Using your credit cards and paying them off on time shows lenders that you know how to handle credit responsibly, adding to your credit score. Through regular use, you keep your accounts active, showing you are not just letting them rot on the shelf.
• Credit card rewards: Another great benefit that comes out of using credit on a regular basis is all of the rewards you can rack up. If you have more than one credit card, you can decide which to use for what purchases so that you can maximize the benefits. One card may give you cash back on groceries; another may rack up travel points. It’s like planting different crops on the same farm.

To that point, suppose you hit the credit limit on one card. In that case, you can make purchases on another to spread out your spending, helping to keep your credit utilization per card low. Lenders like to see that you’re not maxing out your cards, and using multiple cards wisely can help with that. 

Plus, keeping all those accounts open helps your overall credit score, as long as you’re responsible with them. Those old cards will keep on bolstering your profile. It’s all about keeping things steady and balanced. Use credit often, but use it smartly.

It’s good you know the myths surrounding credit history length so you don’t get led down the garden path. Believe a few of those tall tales, and you could wind up hurting your credit score unnecessarily. 

Understanding the truth helps you manage your credit better and avoid mistakes that’ll come back to bite you later.

1. Closing Old Accounts Won’t Improve Your Credit Score 

Closing an account can actually do more harm than good because the credit scoring systems consider how long the accounts have been kept open. Some people believe it improves the credit score when they close old accounts to “clean things up,” but such an assumption is wrong.

The older the account, the better it is for your credit history, and closing it snatches that away from you.

It was true that closed accounts still remain on your credit reports for as long as 10 years. However, they no longer add any value to the age of your current accounts. Once an account is closed, you can kiss it goodbye.

If you do have an older account with an annual fee that you’re simply not using, try this little trick before you close it. Call the credit card company and ask if it can switch you to a no-fee card instead. That way, you keep the account open, hold onto the history, and don’t pay for something you aren’t using.

2. Opening New Accounts Don’t Reduce Your Credit History Age

Let this really sink in: There is a myth going around about how opening a new card cuts down your credit history like a tree in the forest. But while it’s true that opening cards can whittle down the average age of your accounts, they don’t slash your history unless you’re really opening a whole bunch at once.

Take Belinda, for example, who owns three credit cards she has had for an average of six years each. So, if Belinda opens a new card today, the average age would drop a little to approximately 4.5 years, and it is not going to hurt her credit score that badly.

The thing you want to do is try to space out your new accounts so you don’t lower your average age too much.

For Math Nerds Only

Let me walk you through how Belinda’s card ages work, taking into consideration that the opening of a new card causes the average age of her credit cards to drop from 6 years to 4.5 years.

Step 1: Determine the current total age of Belinda’s credit cards

First, we need to find the present total age of all of Belinda’s credit cards.

Belinda has three credit cards and has had them for an average of six years.

The average age of her current credit cards can be calculated by multiplying the number of cards by their total age:

Total age of three cards = 3 × 6 = 18 years

Step 2: Add the new credit card

When Belinda opens a new credit card, the age of that card is considered 0 years; therefore, the total age of all her cards, including this new card, remains the same, and the total number of cards is four:

The new total age of all her cards is:

New total age = 18 years + 0 years (new card) = 18 years

Step 3: Calculate the new average age

Now, this average age of Belinda’s four cards can be calculated as the total age divided by the number of cards:

New average age = New total age / Number of cards = 18 / 4 = 4.5 years

Conclusion

Before Belinda opened the new card, the average age of her three credit cards was six years. With the addition of the new one, this average drops to four and a half years. This demonstrates how a new account brings down the entire average age of your credit history, but it’s not a drastic drop, especially when you have had accounts open for a long time.

Lenders want to see that you can handle credit over an extended period, and as long as you have a few older accounts in good standing, opening up one new card isn’t going to tank your score. What’s important is managing it all responsibly: making on-time payments and keeping low balances.

3. There Are No Immediate Impacts

Some people think the length of their credit history changes immediately. However, credit history is more like a slow-growing tree rather than a hothouse flower.

What happens, even when opening up a new account or closing an older one, is that the effects aren’t going to be instantaneous within your credit history. It could take months, sometimes running into years, before you actually reap the full impact on your credit score. You’ve got to be patient and let your credit history grow steady and strong.

Building up your credit history isn’t like fixing a fence in an afternoon. It’s more like growing an oak tree. It takes years of patience, consistency, and a little tender, loving care. 

I’d say it’s well worth the effort, though. Once grown, the mighty tree stands tall even after several decades. 

My advice to you: Don’t hurry. Just keep on attending to your accounts, and you’ll grow yourself a big, sturdy credit score to help you prosper in the undiscovered country of the future.