Credit Series: Credit Age

This is the fourth part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

This category accounts for 15% of your score. Research shows that credit risk decreases as age increases. The goal is to have your credit age be as high as possible. Over time, this will increase, although there are ways to increase the age of your credit due to the way it is calculated.

Credit age is measured in two ways. The first is the date you opened your oldest account. This may be different than your “credit report established date.” Personally, my credit report’s age is 8 years older than I am. This is because I was added as an authorized user on my parents credit card that they opened in 1979.

The second measurement is the average age of all accounts on your report. The longer credit cards are open, the bigger the credit age, which helps your credit score.

There is no easy way to increase your credit age other than to get started when you are young and be patient. Everyone starts at the same place, but over time, credit age will increase. Adding new accounts to the credit report will hurt the average age of your accounts, but eventually you will earn points in this category. Be selective when you are shopping for credit: don’t open up multiple retail store credit cards just to save 20% one time. The negative impact on your credit score will have much larger effects.

Another way to increase the age of your accounts is to be added as an authorized user of a family member who has an old account. However, make sure that they are in good standing. A old, delinquent account on your credit report will hurt your score much more than having a higher credit age will.

Yesterday we took a look at debt usage and our reason for keeping accounts open was to have high lines of credit and low utilization. Today the reason to keep your credit accounts open is to make sure our credit age remains high. However, if you decide to close a credit account, it would be more beneficial to your credit age to close the account you opened most recently opened. While this will hurt your score because your utilization will go up, your credit age will increase, partially offsetting the effect.

The important lesson from today is to be patient, keep the oldest accounts open, and make smart decisions when deciding to open credit accounts.

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