While some people would rather not think about the three-digit number that impacts so many factors of our adult lives, it’s vital to make sure your score is solid or moving in the right direction. Why? If you want to buy a home or car, if you’re looking for a new apartment, or just want to get a better rate on your car insurance, your credit score – which ranges from 300 to 850 – offers lenders some insight into how creditworthy you are.
In other words, that score – if it’s on the high side – lets a lender know you could be a good candidate for paying back the money you borrow. On the other hand, a not-so-great score can be a signal that they may not be able to count on you to pay back a loan on time or in full. So it only makes sense that learning what it takes to pump up the volume on your score can help you:
Earn lower rates on loans
Get better terms from a landlord on a lease
Ultimately save money in the form of lower mortgage, rent, and insurance payments
While there are five elements comprising your credit score, today let’s focus on credit age.
What is Credit Age?
Also known as the length of your credit history, or ‘depth of credit’ as VantageScore refers to it, credit age is a component of your credit score that makes up between 15% and 20% of your total score depending on which measure a particular lender uses. For those who pull a FICO score, your account age comprises about 15% of the total. Those who use newer versions of the VantageScore — such as the SavvyMoney tool — will see your credit age weighted at up to 21% of the total score.
Specifically, VantageScore includes your average, oldest, and youngest account age to calculate your depth of credit. That means older accounts generally help your VantageScore, offering lenders a longer look at your money management skills. Plus, the credit age category also takes into account the types of credit lines you use: revolving and installment. Revolving debts include credit cards. Installment loans include auto loans, mortgages, and personal loans. People who show they can handle both types of credit well typically receive higher scores.
Why Credit Age Matters
If you’re wondering why the age of your credit history matters — and has an impact on your score — it’s because credit scoring models – and research – historically have shown that those with older credit lines are less risky clients. Lenders like to see you’ve been able to maintain a long-term relationship with a creditor, because it often means you’ll continue to be a good customer.
Improving Credit Age
- Keep Older Accounts Open. If you can help it, try not to close older credit card accounts. And if you receive a letter in the mail informing you that an older card could be closed because you no longer use it, go ahead and make a purchase with the card and pay it off immediately.You can also set up an automated payment using that card so it’s in active use again. If the card carries a high annual fee, try calling the company and asking them to switch the card to one with no fee or a lower fee. That can help you keep your longer credit age and potentially higher score.
- Join Another Account. Sometimes, parents with solid credit add their children to an established credit card account to help extend their credit history. If you do this, make sure the account holder confirms with the lender that credit usage is being reported to the three major credit scoring bureaus: Experian, Equifax and TransUnion.
- Consider a Secure Card. Many credit card companies now offer secured credit card accounts to assist those with little or no credit to build up their history and score. For this account, you make a deposit with the card issuer as collateral. Once you get the card, use it at least once a month and pay it off in full – on time – every month. If you maintain good financial habits with this card, in 12 or 18 months you should be able to ‘graduate’ to a traditional credit card with the same credit card company.
The Bottom Line
Building a good credit history (and higher score) takes time. That means you can’t realistically expect your financial situation to change overnight. If you pay all of your bills on time every time and keep your balances below 30% of your credit limits, those responsible habits should over time translate into a better credit score.
For more information on common credit score mistakes and fixes, check out this blog post here.
So, how do you find your credit score?
Our Fidelity Bank customers enrolled in online banking have free access to securely check and monitor their credit score through Credit Sense. There’s no hard pull on your credit, and you can get alerts if your score changes. Learn more.
Since your credit score is based on your credit report, you should check that report regularly, looking for any discrepancies in payments and your credit accounts. You can check your credit report for free by visiting annualcreditreport.com.
Prepare for your next financial decision by being aware of your credit score. Check out the personal checking account options from Fidelity Bank, which come with Credit Alerts and our digital banking tools.