how much money can a good credit history save you over the course of your lifetime

Full Answer

How many years of good credit history do you need?

Having at least five years of good credit history puts you in the middle of the pack. It's not until you have seven to 10 years of solid credit history that you'll score top marks for this credit factor. Of course, it's not just the age of your overall credit history that matters.

How much does your credit history affect your credit score?

FICO credit scores break it out a little differently, with the length of your credit history accounting for 15% of your score and the mix of accounts making up 10%. See your free score and the factors that influence it, plus insights into ways to keep building.

How much credit history do you need to get a mortgage?

Most lenders (and scoring models) consider anything less than two years of credit history to be little more than a decent start. When you get into the two- to four-year range, you're just taking the training wheels off. Having at least five years of good credit history puts you in the middle of the pack.

What does credit age and length of credit history mean?

Length of credit history vs. credit age The "length of credit history" means how long any given account has been reported open, says Rod Griffin, director of public education for Experian, one of the three major credit bureaus. “Generally, the longer an account has been open and active, the better it is for the credit score," Griffin says.

Mortgages

A bad credit score can dramatically affect the amount you’ll pay when buying a home. Simply put, the higher your credit score, the lower your mortgage APR. An APR, or the cost to you of borrowing money, includes the interest rate and any other charges associated with borrowing money from a lender.

Credit Cards

When shopping around for credit cards, you will often see a range of APRs that are offered with the card, followed by three key words: “based on creditworthiness.” A good credit score can mean the difference between an APR in the mid-teens or one in the upper 20s. In some cases, it may also mean the difference in getting a credit card or not.

Insurance

In some states, a credit score can help determine your car insurance premiums. In fact, a recent WalletHub study found that, on average, people with no credit pay 67% more for car insurance than people with excellent credit.

Written By

Brittney Castro is the founder and CEO of Financially Wise Women, a Los Angeles-based financial planning firm whose mission is to teach women and couples in their 30s and 40s the art of managing their money the fun and simple way.

Brittney Castro

Brittney Castro is the founder and CEO of Financially Wise Women, a Los Angeles-based financial planning firm whose mission is to teach women and couples in their 30s and 40s the art of managing their money the fun and simple way.

What is the benefit of a good credit score?

A mortgage is arguably where the benefit of a good credit score most affects a family's bottom line. Because mortgages typically are for large sums of money and amortize over long periods of time, they are very sensitive to small differences in interest rates.

What credit score do I need to refinance a student loan?

One company called SoFi (short for Social Finance) offers refinance rates ranging from 4.615% to 6.50% on a 10-year fixed rate loan. While SoFi doesn't disclose details of its underwriting standards, representatives of the company informed me that applicants should have a credit score of about 725 or higher. A significantly lower FICO score could rule out the possibility of refinancing a student loan to a much lower rate.

Can a bad credit score affect a credit card?

Credit scores can affect credit cards in several ways. Of course, a bad credit score can result in the denial of a credit card application. For those that do qualify, however, credit scores can still have a significant affect on the cost and benefits associated with credit cards.

How many years of credit do I need to get a credit score?

Having at least five years of good credit history puts you in the middle of the pack. It's not until you have seven to 10 years of solid credit history that you'll score top marks for this credit factor. Of course, it's not just the age of your overall credit history that matters.

How to find average age on a credit score?

To determine the average age, you simply add up the age of each account, then divide by the total number of accounts.

Why should I hang on to my first credit card?

1. Your overall credit history. This aspect of your score is pretty straightforward, as it simply looks at your single oldest account. This is a great reason to hang on to your first credit card. And it's even better if it's a no-annual-fee card you can leave open without any costs.

How old do you have to be to get a scorable credit score?

Age well for best results. While six months is the minimum age before you're fully scorable, that's the bottom of the range -- way at the bottom. Most lenders (and scoring models) consider anything less than two years of credit history to be little more than a decent start.

What does it mean to have one old credit account?

Having at least one old credit account in good standing shows lenders that you've had a lot of practice responsibly maintaining credit. But that's not all there is to see. For example, having one old account and a dozen new ones could tell an entirely different story.

How long does it take to get a FICO score?

You need six months of history to get a FICO® Score. To start building a credit history, you need at least one credit account that reports your payment history and balance to at least one of the three major credit bureaus: Equifax, Experian, and TransUnion. But you don't get a credit score right away. The credit history requirement ...

How long does a closed account stay on your credit report?

Accounts closed in good standing can stay on your credit reports for up to 10 years. 2. Your average account age. This part of your score looks at the average age of your accounts, across all of your accounts.

How many years of credit history do you need to get a loan?

In many cases, lenders consider anything between two to four years of history a good starting point. A solid history that will count as a positive in your favor is about 10 years of good credit.

What is a good credit score?

A score of 670 to 739 is considered good; 740 to 799 is seen as very good; and 800 and higher is considered excellent. If you’re just starting out building your credit, a score in the low 700s is a good target to aim for. When you begin building credit, however, you don’t start with a 0 or a very low number like 300.

What credit bureaus do I need to build a credit score?

In order to start building a credit score, you must have an account that reports your payment history and balance to one of the three big credit bureaus: TransUnion, Experian and Equifax.

Is it good to hang on to an older credit card?

There are many factors that go into calculating your credit score, but hanging on to an older credit card you still use and shows a strong payment history is a good idea. The other aspect to consider is the average age of your accounts.

Is age a factor in credit score?

The age of your accounts is a factor too — and an important one. The further back your credit history goes, particularly if it’s a good credit history, the better it is for your overall score and your borrowing options. Here are some quick facts about credit history and different ways to boost your score: Advertisement.

Can I have good credit without a credit history?

Your credit score is very important for many different financial goals, but you can't have good credit without first establishing your credit history. There’s more to your credit score than how much you owe. The age of your accounts is a factor too — and an important one. The further back your credit history goes, ...

Does opening a new credit card lower your age?

As you can see, every new credit card or account you add will lower the average age. And a slew of new accounts will lower it very quickly. And as far as lenders are concerned, the older the age the better, so it’s a great reason to steer clear of opening new cards too often.

What does "length of credit history" mean?

The "length of credit history" means how long any given account has been reported open, says Rod Griffin, director of public education for Experian, one of the three major credit bureaus. “Generally, the longer an account has been open and active, the better it is for the credit score," Griffin says. "That’s particularly true for an account ...

What are the factors that affect your credit score?

Here's a breakdown of the factors that affect your credit scores: The biggest effects on your credit score come from: Payment history — making sure that you pay on time, every time. Credit utilization — making sure that you use no more than 30% of your available credit.

What does a long track record mean?

A long track record without any major slip-ups suggests that your credit behavior will be similar in the future — and lenders and credit card issuers like that. VantageScore combines two factors — how long you’ve been using credit and what types of credit you have — into a single factor and considers it “highly influential.”.

Does having an authorized user on an old credit card help your credit score?

Being an authorized user on an old, established account in which the primary cardholder has excellent credit may help your score a little, but the passage of time during which you build or maintain good credit helps the most. Keep the length of credit history in perspective: It’s only one element influencing your credit score, ...