Seasoned revolving accounts can be a tremendous credit builder. You may find however that opening credit card accounts did not give you the boost that you needed to your scores, and may in fact have lowered your scores!
| “Length of Revolving Credit History is Too Short” | Credit Score Risk Factor Codes |
| Equifax | 12 |
| Experian | 12 |
| TransUnion | 12 |
| NextGen | J8 |
Fair Isaac Corporation and the major credit bureaus utilize risk scoring models that predict repayment behavior based on a number of factors. They place much emphasis on how you utilize credit card accounts since these open accounts can sometimes be difficult to manage.
A full 15% of your credit score is determined by the duration of your credit history. Opening new accounts will reduce the average age of your accounts.
Still, if you have no revolving credit accounts or lack a major credit card, understand that you will lose potential points in your credit scores. This does not mean that you need credit cards to establish good credit. It simply means that your scores might not reach as high without them.
There is a penalty if you have too few revolving credit accounts. However, there are also penalties for applying for several accounts within the past 12 months as well as for having opened too many accounts recently.
If you do have credit cards already opened, then it means that you could see a slight penalty if you close any of your accounts. This may indeed get complicated if some of your lenders begin instituting annual fees, since the cost of the annual fee might not be worth keeping the card open.
If you do choose to close an account, it is better to close one of your more recently opened accounts. Your oldest account should be left open if at all possible. According to Fair Isaac, “FICO High Achievers opened their first revolving account 19 years ago, on average.”
To increase your length of revolving credit history, make sure that you have already opened a credit card account that you want to stick with for the long haul. Avoid fee harvester cards or other products from subprime lenders.
Once you have at least one major credit card, make sure that you maintain the account in good standing. You will need to always make your payments on time, since payment history has the highest impact on your credit scores.
Second, never allow the balance to exceed 10% of your total credit limit. Doing so can increase your credit utilization rate.
Finally, make sure that you utilize the card periodically. A lack of recent revolving activity can cause you to lose precious points. Some card issuers go so far as to require at least $2,400 in annual activity to justify keeping the account opened. Most lenders do not have this requirement though. The most important consideration is to avoid taking on more debt than you can handle.
As long as you maintain your active credit card accounts and keep them in good standing, you will continue to gain points. This code will eventually disappear as your older accounts age and you avoid taking on too much new credit.
Length of revolving credit history is too short is credit bureau risk score reason 12. It may also be listed as “length of time revolving accounts have been established”. Code J8 applies on NextGen scores. For more informationo on credit scoring, see the complete list of credit score factors.
Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.
Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.
In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.
Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!
Favorite quote:
"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
Thomas Jefferson
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