This is a 5 Part Series explaining the basics of good credit.
The third factor in good credit is the age of your credit history. Your credit history includes all your accounts (both new and old) and any activity that would affect your credit score. Let me give you two examples so that you can see the difference between the two:
Account 1: opened in May 2000 and is in good standing.
Account 2: opened in May 2008 and is in good standing.
Which account will give you a better credit rating? You may be thinking that they’re both equal because neither account has negative information. Yes, it’s great that both accounts are in good standing, but Account 1 is better, because it show that you were able to meet your obligations for several years without missing a payment or making any other significant mistakes.
So how can you make this factor work for you? First, take care of your accounts, even if you’ve just started establishing credit. It will pay off over time. Second, DON’T close your oldest accounts. Once you close an account, it won’t count towards your credit score. Anytime you pay off a higher interest credit card, or transfer your balances to a newer and better card, keep the old card open and just don’t use it. By keeping the account open, you preserve your good credit history and improve your credit debt / credit limit ratio. (see last week’s Quick Tips for more information). Both of these factors are great for your credit score.
Next week we’ll talk about credit inquiries – so watch for it in your inbox.
Jill Russo Foster is the author of Cash, Credit, and Your Finances: The Teen Years. She provides practical tips for every day finances. Learn more about protecting your credit and living within your means, with Jill’s popular free reports and bi-monthly ezine, available here ==> CashCreditandYourFinances.com
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