Credit age: How the length of credit history affects your credit score

The length of your credit history is one of the biggest factors that affect your credit score. Find out why in this article, as well as how to improve your credit score despite having a younger credit history.

What is the credit score?

Developed by the Fair Isaac Corporation, credit scores are three-digit numbers that provide a snapshot of your credit history. Lenders, credit card issuers and other lenders use your credit score to determine your creditworthiness. Generally speaking, the better your credit score, the more creditworthy you are. And the more creditworthy you are, the more likely you are to manage your debts well. 

A high credit score can make it easier to apply for various products and services including loans and credit cards as well as larger lines of credit.

In addition to credit history length, there are several factors that FICO assess to determine your credit score. These other factors include:

• Your credit utilization ratio

• Whether you've declared bankruptcy

• How many credit accounts you have

• Whether you have experience managing different types of accounts

• How many new accounts you've applied for recently

• If you've recently opened new credit accounts

How the length of your credit history affects your credit score

The length of your credit history refers to the amount of time your credit history has been established. In order to obtain a credit score, you need to have at least some form of credit history. In other words, you need to have established lines of credit with financial institutions, credit card companies and other lenders and creditors. 

If you’re new to the U.S. and hoping to build a credit score here, you can learn more about how you can use your foreign credit history through Nova Credit to apply for products in this article. 

When FICO assess the length of your credit history, the credit scoring agency considers these three factors:

1. The length of time that your accounts have been opened

2. The length of time that specific types of credit accounts have been opened

3. The amount of time that has passed since your credit accounts have been used

The FICO scoring model assesses the ages of both your oldest and your newest accounts, as well as the average age of all of your accounts combined.

How long does it take for the age of your credit history to impact your credit score?

To obtain a FICO credit score, consumers need credit accounts that are a minimum of six months old. While VantageScore. Therefore, if you opened your first credit card account five months ago and you don’t have any loans or other forms of credit, you won’t have a credit score, even if you have been responsibly managing your account and making your payments on time and in full.

Closed accounts that were managed responsibly (i.e., paid on time) will remain on your credit report for 10 years, beginning from the date that the account was closed. Meanwhile, closed accounts with a tarnished record (e.g. a history of late payments) will remain on your account for seven years, beginning from the date that delinquency was first reported.

How to build your credit score if you don’t have credit

If your credit accounts are younger than six months, you still have several possible options to improve your credit score:

Open a bank-issued credit card. While you may not be able to apply for a credit card from one of the major credit card issuers, having a checking or savings account with a financial institution may make you eligible to obtain a credit card from the bank. As an existing customer, your bank may be more likely to approve your credit card application.

Open a store credit card. Alternatively, you could apply for a store credit card, like a gas credit card or a card with a retail establishment. Often, score credit cards have low limits, but on the plus side, there aren’t many qualification requirements. Learn more about store cards here.

Open a secured credit card. With this type of credit card, you pay a security deposit as collateral in order to secure the line of credit that the card offers. For example, if you pay a security deposit of $300, your credit line will be $300. If you fail to make payments on the account, the issuing agency can withdraw the funds from your security deposit. Your credit history is not usually a factor for opening a secured credit card. This is because you’re not borrowing the money from the credit card issuer but from your own deposit. Therefore, this type of credit card is easier to obtain than a standard credit card. Issuers of secured credit cards report information to credit unions, so as soon as the card reaches 6 months, your credit score can be calculated. Read more about secured cards.

Become an authorized user. If a trusted friend or family member has a good credit history, he or she may be willing to let you become an authorized user on the account. Once your name is added to the account, your information will be reported to the credit bureaus. Therefore, your score could benefit if the primary cardholder has a good credit history and their account is in good standing. Be aware, however, that if the primary cardholder makes late payments or uses the maximum amount of credit available on the card, your credit score could suffer, too.

If you recently moved to the U.S., apply for products using Nova Credit.  Nova Credit has built technology to translate credit data from countries like Australia, Canada, India, Mexico, the UK and more into a U.S.-equivalent score that newcomers can elect to share with U.S. companies when they apply for credit products here. This means that newcomers to the U.S. can now apply for credit cards, apartments, loans and other credit products by using their foreign credit history. Once you use your foreign credit history to get a credit card or other credit product here, you can start to build a U.S. score.

It’s important to note that whichever method you use if you want to maintain a healthy credit history, you need to be responsible. Make payments on time and don’t forget to maintain a low balance. Your payment history and the total amount of available credit you use (a.k.a. credit utilization ratio) both have a significant impact on your credit score. 

Should you close existing accounts?

Credit scores are calculated to provide lenders and creditors with a broad picture of your credit history over a specific period of time. If you close accounts you’ve had for a prolonged amount of time and you don’t open up any new accounts, your credit history will be significantly shortened. If your other accounts are younger than six months, you may not be able to obtain a credit score.

The takeaway

Your credit history needs to be at least six months old in order for you to have a credit score. If you only now started building your credit score, then you’ll want to try other ways to build and maintain credit in the meantime. Visit Nova Credit’s resources for newcomers to learn more about different techniques to improve your credit score, even with a young or non-existent credit history.

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How to get a credit card without a social security number

How to use credit cards to build credit history

How to build credit in the US

How to get a social security card

How to get an apartment with no credit history

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