How long is a good credit history?
What is the single most important factor for your credit score? It is the length of your credit history. I want to share with you a little bit more about the importance of the length of your credit history.
Joyce and I talked about this last week. If you’re just starting out establishing credit, go ahead and bite the bullet open 3-5 new accounts all at once. Then ride the dip of your credit score out and watch it improve later.
There is more to a long credit history, than just how old is your oldest account is (but that is the most important factor). When did you establish that first account on your credit profile? It’s important to have at least one account as old as possible. You need one account ten, twenty, thirty years old to get to the top of the FICO scoring model.
If you are just starting out, I know you cannot have that long of a history. That is why it is important to keep your oldest account active, if you want to score right at the top of the scoring range. The FICO score range is 300-850, to score in the 800’s you need a credit history that dates back a couple decades.
The other thing that FICO considers important to a good credit history is; when was the last time you opened your newest account. The third thing is the average of all your accounts together to arrive at your average account age.
Your length of credit history is made up of the previous three factors, plus two more;
- How established is your verity of credit is. (installment mortgage revolving, auto loans) FICO looks at what is your oldest established account on each of these types of credit.
- Then FICO also looks at the recent activity of those accounts. If you had an auto loan that was closed five years ago that will not be as beneficial as if you were at the end of a current five-year auto loan.
The length of credit history is very important and what you need to understand is if you have an old account on your credit profile, I would keep that old account active somehow, charge one thing a month. Your cable bill, a phone bill, something to keep it active then pay that off monthly. That way you establish that long credit history.
It is so important, if you really want to score at the top of the scoring model.
If you’re looking for other ways to improve your credit score please go to GetLoanReady.com you can get free videos and worksheets to increase your credit score from a more holistic perspective. Never Pay Collections
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