What is the Impact of Credit History on My Credit Score?

When your credit isn’t great, you want to know how long it will take to get back on track. The trick is understanding the factors used to calculate your overall score. One of these factors is the duration of your open lines of credit. Here’s a look at how your credit history can impact your score and how much it matters.

How Long Have You Had Credit?

One factor in your credit score is the length of your credit history. In general, the longer you’ve been using credit, the better picture it provides as to whether you are likely to understand and meet your debt obligations.

But creditors also want to know the average age of all your accounts.1 A large number of new accounts, may indicate that someone is seeking out new lines of credit to stay afloat — which may be a red flag for lenders.2

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Recent Credit History Matters More than Old History

Late payments remain on your credit report for up to seven years.3 However, even though old mishaps will weigh down your score so long as they remain on your credit report, debts older than 24 months impact your score less than newer delinquencies.4

What Have You Done With Your Credit?

More important than the age of your credit history is what you’ve done with it. For context, new accounts (accounts opened in the last six to 12 months) and the length of your credit history account for a lower percentage of your overall credit score, while payment history (on-time payments) and debt utilization ratio (how much of your available credit you’re using) each account for roughly one third.5

There’s no fast track to a good credit score. Pay your bills on time, reduce your debt and only apply for new credit when you need it. Do that and a good score will come.

Resources:

1. http://www.nerdwallet.com/blog/credit-cards/credit-score/length-credit-history-fico-credit-score/

2. http://www.nerdwallet.com/blog/credit-cards/credit-score/too-many-credit-cards-hurt-fico-score/

3. http://www.experian.com/blogs/ask-experian/2013/08/28/when-negative-information-will-be-removed-from-your-credit-report/

4. http://www.credit.com/credit-reports/late-payment-secrets-revealed/

5. http://www.creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php

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