Like A Fine Wine, Your Credit Score Gets Better With Age

What goes into your credit score is a complicated mix of various factors and algorithms. There are many factors taken into account to determine your credit score, but today, we're going to look at just one of these factors: time, and how your credit score gets better with age.

Did you know that the longer you keep a credit account in good standing, the better your score will be?

How It Works

If all of your credit is new, no matter how well maintained it is, it only reflects your short-terms habits. Your long-term repayment history says a lot more about your trustworthiness to lenders than your short-term habits do. The average age of your accounts is visible on your credit report. It's calculated by adding the length of time on each of your listed accounts and then dividing it by the number of accounts on your credit report.

For example, let's say you have three accounts on your credit report. One is ten years old, another is three years old and the last is one year old. There is a total of fourteen years of history across all accounts. What you do next is divide the fourteen years by the number of accounts, so 14 ÷ 3. This calculation will tell you the average age of your accounts, which is 4.67 years. The higher the average, the better it will reflect on your credit score.

Keeping Accounts Open

Unlike your favorite bottle of wine, your credit will only improve if you keep them open. Your oldest account is your best asset when calculating the average age, so make sure you keep in open and in good standing for as long as possible. Once you close your oldest account, your average age can shrink quite a bit. If your oldest account has a high-interest rate, don't use it often or pay it off in full each month to avoid unnecessary fees.

To Summarize

You can easily protect this portion of your credit score by keeping accounts open as long as you can and in good standing. The longer you have an account in good standing, the more it will benefit your credit score.