The IFCU Blog

We unpack a sometimes overlooked factor in your credit score 

Do one thing: If you are among the millions of Americans who don’t regularly review your credit report, get to it. View yuor free credit report and more with Industrial Federal Credit Union's FREE Credit Score tool.

Having a better understanding of the secret sauce used to tabulate your credit score can set you up to make smarter financial decisions in the future. 

And that, of course, can lead to saving more of your hard-earned money when it comes time to finance a new car, rent an apartment, or even get the best deal possible on auto insurance. (And yes, in most states, insurance companies and landlords now use your credit score to decide how much to charge you. As in, the higher the score, the lower the premium.)

There’s science behind this, too. Research shows that people with higher levels of financial literacy are less likely to live paycheck-to-paycheck, which is when you spend everything you earn and aren’t able to set something aside in savings. Findings from the FINRA Investor Education Foundation’s National Financial Capability Study found that money-savvy respondents fared better on a variety of measures than those with less financial knowledge. 

“Those with higher financial literacy,” according to the study, “were also more likely to have taken steps to plan for their long-term financial future by calculating retirement savings needs (52%, compared to 29% among those with lower financial literacy) and opening a retirement account (70% vs. 43%).”

When it comes to your credit score, what you don’t know can hurt you. With that in mind, let’s deconstruct the different aspects of your score, which typically ranges from 350 to 800, and review some of the most important details. That way, you’ll be better equipped to apply for a loan or change insurance companies with confidence, rather than dread. 

There are two leading companies offering credit scores – FICO and VantageScore – that utilize five main categories when compiling your score. Today, we’ll tackle the credit age category, which is a part of your score that makes up between 15% and 20% of the total, depending on which score is being used. (Long story short: We all have multiple scores produced by FICO and VantageScore.)

What is Credit Age?

Credit age is sometimes referred to as the length of your credit history. Those using a VantageScore may see it called “depth of credit.” For those who use a FICO score, account age comprises about 15% of the total. VantageScore, which is used on the SavvyMoney tool, weighs this sector a little differently, with credit age accounting for up to 21% of the total score.

What is the Average Age of Credit?

The average age of credit is a calculation of the average time all of your listed accounts have been open. If you don’t have very many accounts on your credit report, opening a new card may impact your score more than if you have several open accounts.

Why it Matters

Credit age has an impact on your score because research shows that historically people with older lines of credit tend to be less of a risk when it comes to loaning money. For that reason, landlords and lenders want to see you have the ability to maintain a long-term relationship with a creditor issuer.

Tips for Improving Credit Age

Explore Secure Loans. Many credit unions offer secured loans to help those with little or no credit file build up a longer history and score. For this type of loan, you simply borrow, using your own savings as the collateral. Credit unions will report the loan just as we would a personal installment loan, so it will build credit history.   

Join a Parent’s Account. Some parents and guardians with good credit add their children to an established credit card account as an “authorized user” to help extend their credit age. If you do this, make sure the account holder confirms with the issuer that usage is being reported to the major credit scoring bureaus: Equifax, Experian, and TransUnion.

Don’t Close Older Accounts. If possible, try to keep older credit card accounts open. If a particular card carries a high annual fee you can no longer justify, contact the issuer and ask them to switch the card to one with no fee or a lower fee. That way, you may be able to keep your longer credit age and save some money.

Keep This in Mind

Building a solid credit history – and a higher score – requires time and some patience. Aim to pay all your bills on time and keep balances below 30% of your credit limits. Over time, those actions should translate into a better credit score.