Good Credit Score

More Details About Credit Score Calculations

Page 1: How Your Credit Score Is Calculated

Part 3: Credit Score Calculated from Credit Report

Length of Credit History

A full 15% of your credit score comes from the length of your credit history. 

You can't go back in time and make your history any longer, but you can make a common mistake that will make it shorter. 

The length of your credit history depends somewhat on how long you have had credit, basically the length of time since your first loan of some kind.  But, just as important is the age of your OPEN accounts. 

That credit card you've had for twenty years counts as a twenty year length.  Close it, and that length goes away and moves to your next longest card which might be shorter. 

There is no reason to keep a card that is charging you an annual fee if you don't use it, but if the card is free, don't close it unless you have another long-standing account open. 

Stick the card in your safe or firebox and forget all about it.  As long as it is open, you get credit for it's length.

As a side note, if you have children, open a credit card for them as soon as possible. 

Most of the time you have to be 18 to get a card, but there can be exceptions if a parent co-signs (especially if they are a student).  It is not good enough to add them as a user on your card.  That does not put any credit into their name. (Although this is reportedly changing as of February 2009. Some time will have to pass before we can evaluate the impact of any change.) 

What you need to do is open a new credit or loan account in your child's name. Do not co-sign this account. You want to leave this account open forever, so don't put your name on it.

The easiest way to make this happen is to pick up an application on campus for a student credit card.  Most of the time, all you need is a copy of the student id, so they don't even have to be a full-time student.  If they are just taking a class or two they can still probably sign up. 

Some of the offers are so open that it doesn't even say "college student" it only says "student".  If so, sign your child up the day her or she turns 18 even if they are still in high school. 

Make sure it is a card with no annual fee.  You don't need rewards or anything because you won't be using it. 

Worried about giving your child credit that they aren't ready for?  Good for you. 

Just because they have an account in their name doesn't mean they have to have the cards.  Sign up for the account preferably through a national bank of some kind (Chase, Citibank, Capital One, etc) and put your address, their permanent address, on the card. 

When the cards arrive, you keep them under lock and key.  Pull them out every once and a while to buy something, Christmas presents, books, hockey lessons, whatever.  Make sure to pay the bill on time every month. 

Once a year, charge a small amount and PAY THE MINIMUM. Believe it or not, there is a difference between having credit and using it.  Technically, it isn't a loan payment unless there was a loan.  A loan involves interest. 

By not paying the full balance, the account will be charged interest, and that will ensure that it counts as a revolving debt account.

Then, pay it off the next month. Repeat this at least once every 12 to 15 months.

What you are doing is starting the clock ticking on your child's Length of Credit History which will help make their credit score higher for the rest of their life.

DO NOT co-sign or open a joint account with your child.  That makes you liable for the account for as long as it is open, even if there is no balance.  Since the whole point of doing this is to leave the card open forever, you don't want to have any responsibility on that card. 

If your plan is to remove yourself as a joint owner later, don't bother.  Most places consider that opening a new account which means you'll be closing the original account.

Credit Score Calculated from Credit Report