How do I improve my credit age?
Your credit age accounts for about 15% of your credit score. Keep old accounts open and limit new applications to maintain a good average account age.
Improving credit age and credit history is one step toward enhancing your overall financial health. It’s important to show lenders that you have experience managing credit responsibly. In fact, the length of your credit history accounts for approximately 15% of your FICO® score calculation.
But what influences credit age, and how can you improve it? Below, we’ll delve into the calculation of credit age, debunk common misconceptions, and highlight the benefits of having a strong credit history.
Best of all, you’ll learn five tips for how to improve credit age and credit history, setting you on a path toward financial empowerment.
Table of contents:
- What is Credit Age?
- How to Improve Your Credit Age
- Common Misconceptions About Credit Age
- What Is a Good Average Age of Credit History?
- Monitoring Credit Age
- Benefits of a Strong Credit Age
- The Bottom Line
What Is Credit Age?
Credit age, also known as the length of credit history, refers to the average length of time your credit accounts have been open and how many years you have been using credit.
Credit age is determined by the age of your oldest account, the age of your newest account, and the average age of all your accounts. It has a major influence on your credit score because it gives lenders insight into your relationship with credit and your experience handling it.
A longer credit age indicates a history of responsible credit management, which lenders will view favorably.
Components of Credit Age
In general, the longer your credit history, the better your credit score. Let’s take a closer look at how credit age is calculated:
- Average age of accounts: This is the mean age of all your credit accounts. It is calculated by adding the ages of all your open accounts and dividing by the total number of accounts. For example, if you have two accounts that are three and five years old, your average credit age is four years. A higher average age indicates a longer credit history, which is good for your credit score.
- Age of oldest account: This is the age of your oldest open account. You won’t have a credit report until creditors report an account to the credit bureaus. The age of the oldest item showing up on the report, which is usually your very first credit card, is the age of your credit report. It is one of the most important factors, as it indicates your stability and your experience with long-term credit management.
- Age of newest account: This is the age of your most recently opened account. Opening new accounts lowers your average account age, which can have a negative impact on your credit score.
You need to have an account open for six months for FICO to calculate your credit scores. VantageScore® can calculate a score after just a month or two of an account opening.
It’s important to note that while the age of your credit report equals the age of your oldest account, the average age of accounts is also a significant factor in credit scoring models. Open and closed accounts are both considered in these calculations, so closing old accounts can reduce your average credit age and lower your credit score. Additionally, authorized user accounts can influence your credit age, but personal accounts carry more weight in credit evaluations.
How to Improve Your Credit Age
Many people struggle with building a strong credit profile, and a significant factor in that equation is credit age. It takes a strategic approach to see long-term results. Don’t know where to start? Here are five tips for improving your credit age and credit history:
1. Keep Older Accounts Open
Maintaining longstanding accounts is vital because it demonstrates a longer history of responsible credit management. Avoid closing old accounts, especially those with a positive payment history, as this can reduce your average credit age and negatively impact your credit score.Â
Even if you no longer use certain credit cards, keep them open to preserve your average credit age. Be cautious with inactive accounts, as they may get closed due to inactivity. To prevent this, make small purchases with those cards periodically or consider setting up recurring charges that you pay off immediately, like autopay for certain bills.
One exception to this tip: If you’re struggling with debt, paying high annual fees, or know you may be tempted to run up credit card balances, closing accounts might be in your best interest. Consider your situation carefully to make a decision that’s right for you.
2. Limit New Credit Applications
Each new credit application can result in a hard inquiry on your credit report, which can lower your credit score. Additionally, new accounts are young accounts. Each new account you open decreases your average account age. To mitigate this, space out your credit applications and only apply for new credit when necessary.
3. Become an Authorized User
To help children build healthy credit habits and establish a good credit profile early on, parents can add them to a card as an authorized user. Joining a trusted individual’s credit account as an authorized user can enhance your credit age, especially if the account has a long positive history.Â
However, before taking this shortcut yourself, you’ll need to ensure that the primary account holder is responsible and trustworthy. Their actions can directly impact your credit profile. Additionally, personal accounts you’ve opened in your own name are more influential than authorized user accounts.
4. Diversify Your Credit Profile
Having a mix of different credit types can positively influence your credit profile. Lenders like to see a diverse credit profile, including installment loans (like car loans and mortgages) and revolving credit (like credit cards).
5. Consider a Secured Credit Card (If Starting Out)
Even if you don’t have credit right now, you may still be able to qualify for a secured credit card. For people who are just starting to build their credit history, a secured credit card can be a useful tool. Secured credit cards require a security deposit, which sets the credit limit.Â
Secured credit cards are reported to credit bureaus, allowing you to establish a positive credit history with responsible use. As you make on-time payments consistently, you may transition to an unsecured card.
Common Credit Age Mistakes
Every little choice you make about your credit accounts matters. Addressing misconceptions can help you make better credit decisions. Here are some of the most common:
- Opening multiple accounts quickly: A popular misconception is that opening multiple accounts quickly will boost your credit age. In reality, this strategy can lower your average account age and negatively affect your credit score.
- Ignoring inactive accounts: Neglecting old or inactive accounts can lead to their closure by issuers, reducing your average credit age. It’s essential to monitor these accounts and keep them active by making transactions every few months.
- Closing old accounts: A common question is, “Does closing old accounts hurt my credit?” And the answer is generally yes. Open accounts contribute more positively to credit age than closed accounts, so closing older accounts can negatively impact your average age of accounts. It also reduces the total amount of available credit, which can increase your credit utilization ratio.
What Is a Good Average Age of Credit History?
When it comes to credit history, longer is better. There’s no magic number, but here are some ranges to consider:
- 2 to 3 years: Fair but still relatively young.
- 5 to 7 years: Good and beneficial for your credit score.
- 10+ years: Excellent demonstration of long-term responsible credit management.
Monitoring Credit Age
To maintain a healthy credit profile, make regular monitoring of your credit age a part of your budgeting routine. Here’s how:
1. Regularly Review Your Credit Reports
Catch errors before they cause big problems. Obtain copies of your credit reports to check account statuses and ensure accuracy. You can access your free credit reports from the major credit bureaus on a weekly basis.
2. Set Up Account Alerts
You can enable alerts to notify you of any changes to your accounts. Set up account alerts to monitor activity, prevent unintended closures, stay aware of upcoming payments, and catch suspicious transactions.
3. Engage in Responsible Credit Practices
Make all payments on time and keep credit utilization low. These practices improve your credit score, demonstrate your reliability to potential lenders, and help build a stronger credit history.
Benefits of a Strong Credit Age
Now you know how to improve credit age, but what about why? A strong credit age offers several benefits, including:
- Improved loan approval odds: Lenders are more likely to approve loan applications from applicants with a longer credit history because it indicates reliability and experience in managing credit. Lenders are less likely to back you without any historical data to show how you handle your debts.
- Lower interest rates: A strong credit age can qualify you for more favorable interest rates on loans, credit cards, and mortgages. Lenders view borrowers with longer credit histories as less risky, often rewarding them with lower borrowing costs.
- Higher credit limits: A longer credit history and a proven track record of responsible credit management can result in higher credit limits. Creditors are also more likely to increase your credit line over time, which can improve your credit utilization ratio and boost your credit score.
- Better loan terms: A strong credit age works in your favor when applying for important loans, like a mortgage or an auto loan. Borrowers with an extended credit history typically receive better loan terms, which may include lower down payments and more manageable monthly payments.
- Access to premium credit products: Many premium credit cards, which offer benefits like cashback, travel rewards, and concierge services, require a well-established credit history. A longer credit age improves your eligibility.
The Bottom Line
Credit age plays a significant role in shaping your overall credit health and financial future. Understanding how it works and what strategies can improve it, such as keeping old accounts open and limiting new applications, can help you strengthen your credit profile over time.
Improving credit age isn’t an overnight process, but you’ll open doors to better financial opportunities with consistency and smart financial habits. Start today by reviewing your free credit report card.