History Lesson: Why Is Credit Length Important?

Establishing good credit behavior is beneficial for a consumer — doing so over a long period of time is all the more advantageous. 

As is common with many things in life, the longer you excel in something, the more proven a track record you will have built. That’s why the length of a consumer’s credit history is an important aspect in determining their creditworthiness to credit card companies, lenders, and any other party that would access a person’s credit report.

In fact, credit history length accounts for 15% of FICO’s calculation when deriving a consumer’s individual credit score, making it the third most important factor behind payment history and (link: /learn/about-creditcards/the-importance-of-keeping-a-low-credit-utilization-ratio text: credit utilization ratio). 

When it comes to FICO, there are two key determinations regarding credit history that are taken into consideration: how long an account has been open and how long since it’s been used. As far as the length of any given account, FICO weighs the age of a consumer’s oldest account, the age of the newest account, and the average age of all accounts. The more a consumer actively uses their longstanding accounts, while paying their bills on time and keeping spending low, the better it will reflect on their credit score. 

What About Consumers With Bad Credit? 

For people with bad credit, establishing a long and healthy credit history is difficult for a number of reasons. Aside from having a likely poor credit score, it may be difficult to build their credit with new cards due to a low chance of being approved. For these consumers, there are options out there. Secured credit cards are widely available to people with bad credit and often don’t require a credit check. Instead, the applicant would provide a cash deposit, as low as $200, which becomes their initial credit line. For people with a bad credit score (or no credit history), a secured card is a great opportunity to build credit quickly. 

For consumers who practice good credit, but don’t have a lengthy credit history to go with it, there is no reason to panic. As long as the rest of their credit report checks out (e.g., timely payments, low credit utilization ratio, and a mix of different accounts), it’s still possible to have a healthy credit score as you build your history up. In addition, creditors and credit bureaus are starting to put more emphasis on a consumer’s past 24 months of credit history through the use of trended data. This gives them a more accurate snapshot of where a consumer’s credit is headed, as compared to where it’s been. 

While having a long and vigorous credit history is a plus, it’s not the be-all and end-all of determining a consumer’s credit score. People with bad credit still have time to improve their score with better habits and opportunities like secured cards, while those with a brief history of good credit practices just need to keep up the good work. 

For those looking to build their credit with a new credit card, Fiona has offers available from a variety of issuers.