Have you ever looked up your credit scores? It’s important to keep track of your credit scores as it can impact your ability to secure a job, rent an apartment, borrow money, or get a mortgage. There are many factors that can cause your credit scores to fluctuate, but one of the most misunderstood ones is the length of your credit history.
A credit score is a tool used to determine a person’s likelihood to pay a bill or debt. A credit score can range anywhere from 300 to 900 and is calculated based on the information in your credit report.
Credit scores below 560 are considered poor and can affect your ability to borrow money because lenders will view you as high risk. On the other hand, credit scores of 660 and above are considered good to excellent. Canadians with these credit scores will typically have a much greater chance of being approved for credit and being offered higher limits and better interest rates.
When it comes to the length of your credit history, lenders will consider the account that has been opened longest as well as the average age of all your open accounts. Lenders will look at your credit history to predict your future behaviour and decide whether to approve your application.
Accounts, in good standing, that have been open longer, will generally reflect more positively in your credit scores. Age isn’t everything though. If lenders see long-term accounts that are riddled with late or missed payments, your scores may be impacted negatively.
According to Equifax, you should keep your oldest account open, in most cases. They also suggest that since opening multiple credit accounts lowers your average account age, you should open as few as possible. Stick with what you really need. If creditors can see you have a long track record of using credit wisely, they’ll be more likely to approve you.
It’s always best to have accounts, with a variety of ages, in your credit file, but it is important to have an account or two that are significantly older. If you have accounts with an average age of 5 years, you’re likely in good shape. But of course, longer is typically better. So If the average age of your accounts is ten years, you definitely can consider yourself to have a long credit history.
When you pay off a debt, such as a credit card, you might be tempted to close that account to clean up the clutter in your credit file. You might want to think twice, if it’s one of your oldest accounts, especially if you’ve used it responsibly. Closing older accounts will lower the average age and might reduce your credit scores.
The age of your credit accounts may be more important to some lenders than others. Here’s how the length of your history applies to different products:
If you are hoping to purchase a home with little or no credit history, it can be tough, especially if you are approaching the Big 5 banks with your mortgage application. Banks tend to have more stringent requirements than mortgage brokers and online lenders, but if you have at least a year of history, you may be able to pull it off.
Again, it will depend on the lender, while some will require a long credit history, others may not even check your credit. In that case, you won’t have to worry about how old your accounts are.
With a line of credit, you might have a little more difficulty getting approved, especially if you are looking for a higher credit limit or a lower interest rate. If you have an average credit history between 3 – 5 years, you’ll have a better chance of negotiating the line of credit you want.
A credit card is a great place to start when you’re trying to build a credit history. Most consumers can get approved for one without a credit history.
Like credit cards, car loans don’t usually require a long credit history since it is secured. Your approval will generally depend on your income level and overall credit health, but 12 months of credit history should be adequate. Because car loans are easy to qualify for, they’re generally a good option if you are trying to rebuild credit.
If you have no credit history, taking out a small personal loan or applying for a credit card can help you start building your credit history. If you have poor credit, jump-start its improvement by using credit wisely and responsibly. If you are having difficulty being approved for a traditional loan, there are options to help you get started.
While there are many different credit scoring models, these are some common factors that are used when calculating your credit scores, aside from your credit history length, which generally carries a weight of ~15%.
There are many credit score providers in Canada. While some are free, others charge a small monthly fee for you to access it.
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | No | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
Remember, if your credit scores aren’t as high as you would like it to be, you can always make changes to improve it. The best way to improve your credit scores is to use credit responsibly over time.
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Shari is a Freelance Writer, specializing in personal finance, business blog content and education. She enjoys taking complex information and putting it into a form the average consumer can understand. When she is not working, she homeschools her children, supports her husband in business, and enjoys traveling with her family.
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