Having a strong credit history is important for getting approved for loans and credit cards with the best terms. But how many years of credit history do you really need to have good credit? Is 5 years enough?
The length of your credit history is one factor that affects your credit scores. Generally, the longer your credit history, the better. However, there isn’t a magic number for how many years of credit history you need to have an excellent credit score.
Here’s a closer look at how credit history length is calculated and what 5 years of credit history means for your credit,
How Credit History Length is Calculated
What account on your credit report is the oldest? That tells us how long your credit history is. Credit scoring models, such as FICO and VantageScore, figure out how long your credit history is by calculating the average age of all your accounts.
Key factors that are evaluated include:
- Age of oldest account
- Average age of all accounts
- Ages of specific credit accounts
- Time since accounts were last used
For FICO scores, the length of your credit history makes up about 15% of your total score. For the VantageScore, it makes up about 20% of your score when combined with your other credit factors.
This doesn’t have the biggest effect on your credit scores, but it does have an effect on them overall.
Is 5 Years of Credit History Good?
Generally, a credit history of at least seven years is often considered a good length of time, as it provides a significant amount of data to help lenders and credit scoring models assess your creditworthiness.
However, there isn’t a specific threshold where your credit is instantly considered “good” or “bad” based on length alone. Here are a few key points about 5 years of credit history:
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To get approved, it may be enough. You can get loans and credit cards with just 5 years of history. You might not get the best rates and terms, though.
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Your scores won’t be maximized yet: Five years is still on the shorter end of the spectrum. FICO research found an average of 30 years of history for people with perfect 850 scores. So while your scores can be decent at 5 years, they likely have room to improve as your history ages more.
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Other factors matter too: Payment history and credit utilization are more heavily weighted for your scores. So consistent on-time payments and low balances can offset a shorter history.
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Closing accounts hurts more: With a shorter history, closing old accounts has a bigger impact by reducing your average account age.
So while 5 years of credit history is decent, aiming for at least 7 to 10 years of positive history is ideal for boosting your credit scores and qualifying for the best lending terms.
Tips for Building Credit History
Here are some tips to start building your credit history if you’re just getting started:
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Become an authorized user: Ask a parent or spouse with good credit to add you as an authorized user on a long-standing account. This can give your credit an instant boost.
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Open a secured card: Secured cards require a refundable deposit, but are easier to qualify for with no credit history. They’re a great entry point.
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Use retail store cards: Store-specific credit cards tend to have lower requirements than traditional cards. Use them sparingly and pay off balances each month.
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Apply for student cards: Student cards aimed at those with little or no credit history can help you establish positive payment habits early on.
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Consider credit builder loans: These loans place money into a savings account as you make monthly payments. The money is yours after the term ends.
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Review credit reports: Check your reports to ensure accurate information. Dispute any errors that could be artificially reducing your history length.
The Impact of 5 Years of History
While more years of positive history are ideal, 5 years is still decent if you’ve consistently demonstrated responsible credit habits. Payment history and utilization carry more weight, so those good habits make a big difference too.
Aim to keep all accounts in good standing, pay balances in full each month, and limit credit inquiries to continue strengthening your history over time. Patience and diligent credit management are key to maximizing your scores.
So while 5 years of credit history is good, it takes time to build up truly strong credit. Focus on developing positive habits now so your credit foundation will be solid for the long haul.
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Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. In addition to writing for Bankrate, Michelles work is featured with numerous publications including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others.
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Seychelle is a credit card writer and Certified Financial Education Instructor℠ at Bankrate where she employs a cumulative 12 years of experience in the finance industry to help readers navigate the intersection of their money choices and consumer credit.
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Brooklyn Lowery is a Senior Editor on the Bankrate credit cards education team where she focuses on helping everyday consumers leverage credit cards as powerful tools in their personal finance toolbox.
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Erin Lowry is the author of the four-part Broke Millennial series, including: Broke Millennial, Broke Millennial Takes On Investing, Broke Millennial Talks Money and Broke Millennial Workbook: Take Control and Get Your Financial Life Together.
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How is the length of your credit history calculated?
Three primary factors impact your FICO score within the length of credit history category of your credit report.
- The amount of time your credit accounts have been open. This includes the average age of your accounts, the age of your newest account and the age of your oldest account.
- The amount of time specific accounts have been open on your credit report.
- How much time has passed since you last used the accounts on your credit report.
Within the length of credit history category, a FICO scoring model will review your credit report and ask questions based on each of the characteristics above. For example, a scoring model might ask, “What is the average age of accounts on your credit report?” The answer provided determines the number of points you earn — aka the weight — which the scoring model then adds to your overall credit score.
How long is a good credit history? What is the most important thing about your credit history?
FAQ
How long is a good credit history?
Credit history that goes back at least 7 years is good, but WalletHub’s own WalletScore® model gives you the best grade if it goes back 9 years. Maintain Old Accounts: Keep your older credit accounts open and active, as they contribute positively to your credit history’s length.
Does a long credit history make a good credit score?
Building credit happens over time, and the longer your credit history, the better. Except, that’s not purely true, or young people would never have good credit, and older people would have better credit as a baseline. The length of your credit history accounts for roughly 15% of your score calculation, but that’s not a very helpful description.
What is your length of credit history?
Length or age of credit history refers to the age of the accounts that appear in your credit reports. Credit scoring models use various credit age-related metrics when calculating your score, including:
How long does your credit history affect your credit score?
Your credit score is affected by a number of things that are connected to how long your credit history is. These include how long each account has been open, especially your oldest and newest ones; The average length of time all your accounts have been open. How long it has been since you opened a new account.
How long is your credit history based on a FICO score?
When it comes to length of credit history, your FICO Scores take the following into consideration: How long your credit accounts have been open including the age of your oldest account, the age of your newest account, and an average age of all your accounts. How long specific credit accounts have been open.
How long does it take to build a good credit score?
You don’t need three decades of credit history to make solid improvements to your credit score. But establishing good credit does take time. There’s no shortcut to improving your length of credit history unless you have a time machine, so it’s wise to get a start on the credit-building process as soon as possible.
What is a good length of credit history?
Reaching an excellent credit score (750 and above) is generally a long-term goal and may require at least five to ten years of consistently responsible credit habits. Keep in mind that to get this high of a score, you usually need a variety of credit types and a history of paying your bills on time.
Does your credit history clear after 5 years?
Defaults – 5 Years
A default is recorded on your credit file if your payment of $150 or more is overdue by 60 days or more. Defaults stay on your file for five years. Whilst paying or settling a default won’t remove it, your file should be updated to reflect that updated status.
How many years is bad credit history?
Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.
Does credit reset after 5 years?
… show up to 6 years of financial history until settled and closed, financial history older than 6 years will automatically disappear from your credit report