Credit: Length of Credit History

by Lauren Caggiano

 You’re probably familiar with the C-word: Credit. Your credit score affects your quality of life in ways you might not even realize. For instance, your auto insurance rate may be higher even if your credit score is marginal.

 Regardless, there are many moving parts to credit, and history is just one of them. Credit history includes a record of your past debts, payment history, balances (current and sometimes past), and more. Length of credit history is another wildcard that can work in your favor or against you. In simple terms, it looks at the following factors:

 The average age of the accounts on your credit report

  • When you opened your most recent credit account
  • The age of the oldest account on your credit report
  • How long ago you opened individual accounts
  • The length of time since you last used the accounts on your credit report 

Length of credit history is one of the five major credit score categories, so it should be a priority as you’re building or improving your financial picture. But where to begin? An easy way to find your credit history is to request a credit report from one of the credit bureaus. Simply visit Annual Credit Report to request your free reports.

From here you can get a snapshot of your financial past and present. You’ll find a listing of your accounts, the type of account, the date each was opened, and the last time you accessed credit from each one. The longer your credit history, the better it is for your credit score. The minimum amount of time you need to have an account open for FICO® to calculate a credit score is six months. If you’ve just opened your first credit account, you may not have enough data necessary to generate a score.

So, what does this mean to younger borrowers? While a shorter credit history can ding your score, don’t get discouraged. Adopting good financial habits over time can help your cause. That means paying your bills on time and in full, among other things.

So just how long does it take to move the needle, if you’re a newbie or maybe have a poor track record? The experts say 7 years is a reasonable amount of time to establish a good credit history. After seven years, most negative items will have little to no impact on your credit worthiness. However, this isn’t a guarantee. Everyone has a unique financial situation, so the time it takes to boost your credit score and build credit history will vary. However, because time is on your side with credit history, it does put younger people at a natural disadvantage.

If you’re new to credit, listen to the recommendations of experts. For one, you can build a solid credit history by starting with your banking institution. If you have a savings or checking account, they may be inclined to take a chance on you with a low-limit credit card. The fact that you already have a relationship with the lender can work in your favor. You can also try these other tips to get started building credit history and length.

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