First Connecticut Mortgage Co. Newsletter July 2006

Why Is Your Credit Important: Part Six
Length of Credit History is 15% of Your Credit Score

Brought to you by Reynold Nippe

When it comes to the factors that go into making up your ultimate credit score, length of credit history accounts for 15% of your score and it can add provide you with as much as 127 points of a top score of 850. That's a big percentage and well-worth making sure you manage your credit history wisely to maximize those points.

While each of the 5 Credit Score Factors bears its own unique level of importance, this one is key because it traces your credit path all the way back to your oldest account listed on your report. Generally speaking, the longer your credit history, the higher the score for this particular factor. However, even people who have not been using credit long may get high scores, depending on how the rest of the credit report looks.

Your Length of Credit History takes into account the following 3 points:

• How long your credit accounts have been in force. Going back to your oldest account and all the way forward to your newest account, you will receive points based on the average length of your individual credit histories with all of your creditors.
  
  
• How long you have held specific types of credit accounts.
  
  
• How long it has been since you used certain accounts.

How is Length of Credit History Calculated?

Your Length of Credit History is calculated by taking your oldest credit record on file, as well as your most recent line of credit and calculating an average length of time for all of your credit. As a result, there are specific actions you can take to improve this aspect of your score both in the short-term and for the long haul.

5 Tips for Raising This Part of Your Score

While you cannot create a history out of thin air, you can demonstrate to potential creditors that you possess a responsible history with credit, even if that history is a short one. Five ways that you can beef up this part of your score are as follows:

1. Make Sure You Get Credit For Credit: One of the most important aspects about the Length of Credit History Factor is to make certain that all of your records are reflected in your credit report. Because not all creditors are required to report to each of the three bureaus: Transunion, Equifax and Experian, you may not be getting all of the available points for this factor. You can change that by making a simple inquiry to each of the bureaus to determine whether or not important records are missing. If you have good credit accounts that are not listed, write to the creditor and to the bureaus asking them to report the good accounts on your credit report. As you know, single points can make the difference when it comes to getting the best loan possible, so it is crucial that you receive the maximum number of points available for this factor. If you have the history, you deserve the points.
   
   
2. Be careful how and when you add new accounts, especially when you are thinking about entering into a loan transaction. New accounts will lower your overall account age and diminish your length of credit history for a period of 3-6 months, so be sure to have cushion in your score. Even if you have used credit for a very long time, opening a new account can lower our score.
   
   
3. Keep Accounts Open: Even if you have accounts that you haven't used for quite some time, don't close them. They still factor into your length of credit history. Many people have multiple lines of credit, but only use one or two cards. That's okay. It's far better to retain that history than to simply bury it.
   
   
4. Strategically Open New Accounts: Don't open a lot of new accounts at once to establish a credit history. That strategy will lower the "average account age" on your score, which could affect your score negatively.
   
   
5. Ensure that your records are up to date: Credit reports are not perfect. In fact, they are frequently riddled with errors that can drag down your score. Therefore, if you are thinking about a new home or car purchase, it's important that you make sure your credit report contains as much complete information as possible. Request copies of your reports at least 3-6 months before you plan to apply for the loan. By doing so, you will give yourself plenty of lead time to fix, add or remove records that are inaccurate or incomplete. Make sure not to collect records too far in advance as the information does go stale if it is pulled too early. Also, as a general rule, you should be pulling your credit report at least once a quarter to check for accuracy and to protect against identity fraud or theft.
   

In Conclusion:

Your Length of Credit History in an important aspect of your credit, accounting for 15% of your overall score. It's also a factor that you can improve by simply employing the knowledge you have gained from this newsletter. Your Length of Credit History is not a challenging factor, it is quite straightforward and easy to maximize once you put this valuable information to use. As long as you put good credit into action as early as you can, and navigate your credit course with the tips laid out here, you should have no trouble making the most of your credit history.

All the best.