Credit Tip #2- Length of Credit History

I mentioned that I learned that 15% of your credit score is based on the length of your credit history. What can you do to improve this area? I’ve got some great ideas for you!

The trick is that the average of your open accounts should be about 10 years. Let’s say you have a student loan that you’ve been paying on for 10 years. Great! That’s what they like to see! Then, one day, you go to Target to shop for your kids’ Christmas presents, and they offer you 10% off if you open that Target credit card. Hmmm, 10% adds up, and it only takes a minute…

Suddenly, you have a 10-year old debt and a brand new one, and your new average credit history is now only 5 years! That 10% you saved at Target could have an effect on your credit score. Oh, and by the way, if your score goes down, your cards can raise your interest rates, so it could have an even bigger impact on your wallet!

Besides not opening up unnecessary new accounts, there are more ways to help your average credit history. Closing your youngest accounts can help raise the average too! This one is tricky, because if you open a new account to help your ratios (we will discuss this in Credit Tip #3), it MIGHT work for you instead of against you.

Here’s a crazy idea: the man leading the class suggested that we all add our children as “Authorized users” on our credit cards. Especially one that we’ve had for a while, one that we have a low balance on, and never had a late payment. He said that it is a way for our children to “inherit” good credit. Hmmmm.

More to come!

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