Does the length of credit history affect your credit score?

Understand the link between your credit history length and your credit score, and how Bajaj Finserv Credit Pass can help to establish a strong credit history and secure better financial opportunities.
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2 min read
20 July 2023

As you navigate the world of personal finance, you might have heard the term credit score being tossed around quite a bit. This three-digit number between 300 and 900 wields substantial power over your financial life, influencing everything from your ability to secure a loan to the interest rates you will pay. One crucial factor that plays a significant role in shaping your credit score is the length of your credit history. In this article, we will dive into the intricate connection between your credit history's length and your credit score, unpacking its impact and shedding light on the specifics.

Length of credit history vs credit age

Your credit history is like a timeline of your financial life. It is a record of your borrowing and repayment activities, offering a glimpse into your fiscal responsibility. Credit age, often referred to as credit history length, is the duration for which you have held credit accounts. This length of time is a pivotal element in determining your credit score. A more extended credit history generally has a positive impact on your creditworthiness.

Factors affecting credit age

The length of your credit history is not solely determined by how long you have had a credit card or a loan; it also encompasses various other factors. One crucial aspect is the age of your oldest credit account. The older this account, the more favourably it is viewed by credit agencies. Additionally, the average age of all your credit accounts is taken into account. Opening new credit accounts can lower this average and subsequently affect your credit age.

Steps to check CIBIL Score for free

Checking your CIBIL Score is the first step towards understanding your financial health. Credit bureaus like TransUnion CIBIL offer one free credit report annually that you can access to check your CIBIL Score. Simply visit the official website and provide the necessary personal details for identity verification to access your annual credit report for free.

However, if you’re looking to monitor your CIBIL Score regularly, the Bajaj Finserv Credit Pass may be a better, hassle-free option. It offers monthly updates to your CIBIL Score and allows you to monitor your Credit Health Report in real time via your personalised dashboard, with its comprehensive overview of all your credit accounts and credit factors in one place. Sign up today to avail of the limited time offer of a year’s access to all Credit Pass features for free!

The length of your credit history holds undeniable importance in shaping your credit score. It is a testament to your financial journey and a key factor in determining your creditworthiness. Keep in mind, a strong credit history is built over time, so start early and manage your credit responsibly to reap the rewards in the long run.

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Frequently asked questions

What is a good credit age?

A good credit age refers to a credit history that spans several years, showcasing your consistent financial responsibility. While there is no one-size-fits-all answer, a general rule of thumb is that a credit history of at least six to ten years is considered respectable. During this time, you will have demonstrated your ability to manage various credit responsibilities, from credit cards to loans. Keep in mind that a more extended credit history can bolster your creditworthiness, potentially resulting in better loan terms and lower interest rates.

Is 7 years a good credit age?

Yes, a credit age of seven years is generally considered a good milestone. By this point, your credit history reflects a reasonable period of responsible credit management, which can positively impact your credit score. Most adverse entries will have disappeared from your credit report by this time. However, remember that the quality of your credit history matters just as much as its length. Timely payments, low credit utilisation, and a mix of credit types all contribute to a healthier credit score.

What factors contribute to a credit score?

Credit score reports such as CIBIL report determine the credit score of individuals based on factors such as repayment history, multiple credit enquiries, high credit utilisation, and credit mix.

How does responsible credit card usage contribute to credit score improvement?

If you have a credit card or multiple credit cards, your credit history should indicate responsible credit behaviour for credit score improvement. Being responsible means your overall credit utilisation ratio should be below 30% and you should be paying your dues on time. Also, having a mix of credit products such as credit cards and loans helps in diversifying your credit portfolio and improving your credit score in credit reports.

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