The Significance of Your Credit Age

Credit age, also known as the length of your credit history, plays a significant role in determining your credit score. It is one of the five key components used by credit bureaus to calculate an individual's credit score. The other four are payment history, amounts owed, new credit, and types of credit used.

What is Credit Age?

Credit age refers to the duration for which you have had a line of credit open with any lender. This could be a credit card, mortgage, student loan, or any other type of loan. The longer your credit history, the better it is for your credit score. This is because lenders prefer borrowers who have demonstrated responsible borrowing behavior over a long period.

How Does Credit Age Impact Your Credit Score?

Credit age accounts for about 15% of your FICO score - one of the most commonly used credit scoring models. While this may not seem like a large percentage, it can make a significant difference in your overall score. A longer credit history provides more data for lenders to assess your risk level as a borrower.

There are two aspects to consider when understanding how credit age impacts your score:

• Average Age of Accounts: This is calculated by adding up the ages of all your accounts and dividing by the number of accounts you have.
• Age of Oldest Account: Lenders also look at the age of your oldest account as it shows how long you've been managing credit.

The Importance of Maintaining Older Accounts

Maintaining older accounts can positively impact your credit age and subsequently, your overall score. Closing an old account can decrease the average age of your accounts which might negatively affect your score. Therefore, it's generally recommended to keep your oldest credit card open, even if you don't use it frequently.

Building Credit Age

For those who are new to credit, building credit age might seem challenging. However, there are several strategies that can help:

• Start Early: The sooner you start building credit, the better. Consider opening a credit card account or taking out a small loan that you can manage responsibly.
• Become an Authorized User: If a family member has a long history of good credit, consider asking them to add you as an authorized user on their account. This can help boost your credit age.
• Avoid Opening Too Many New Accounts: Opening multiple new accounts in a short period can lower your average account age and potentially harm your score.

In conclusion, while credit age is just one factor in determining your credit score, its importance should not be underestimated. By understanding how it works and taking steps to build and maintain it, you can improve your chances of securing favorable terms on loans and other forms of credit.