So close, and yet so far away...
In the game of personal credit, the maximum score possible for the two most popular credit scoring models (the FICO® Score 8 and the VantageScore 3.0) is 850. Once you hit 850, that's it -- you've now attained peak credit nerd status.
Unfortunately, as much as I'd love to fill that box on my credit bingo sheet (metaphorically -- no, really), the illustrious goal of hitting 850 remains firmly out of reach. Despite a pristine credit history, with not a single delinquent payment and a regular utilization rate below 10%, my credit score simply won't budge above 805.
Why? The answer is the same one my parents gave me when I wanted to see an R-rated movie in middle school: You're just not old enough. Except, in this case, it's my credit history that needs to mature.
The importance of time
Your credit scores are numerical representations of your basic credit history. In general, this is broken down into five main factors:
- Payment history
- Amounts owed
- Credit history length
- Credit mix
- New credit
In this schema, your payment history and amounts owed are the two most important parts of your credit score (weighing in at 35% and 30% of your FICO® Score, respectively). But while that third factor, your credit history length, is worth less -- only 15% of your FICO® Score -- it still has quite a bit of weight to throw around.
The obvious influence on this factor is the actual length of your credit history. I was a late entrant to the credit game, so I actually have just under five years of total credit history. In general, credit scoring models consider anything less than five years of history to be fair, at best. For your credit history length to reach "great" status, you're going to need closer to a decade of history.
And, of course, this is all before we start talking about your average account age. In addition to your overall history age, scoring models (and, thus, lenders) look at the average age of all of your credit accounts put together.
Here's where my score gets a "needs improvement" grade. Thanks to a little sign-up bonus spree a couple years ago, and some new cards opened in my effort to perfect my rewards maximization strategy, my average account age is several years lower than that of my overall credit history.
Why I'm not worried
As much as I want to reach that 850 credit score number for my personal satisfaction (credit nerds gonna credit nerd), I'm not in any way worried about my credit age holding me back from reaching any other financial goals. In the bigger picture, a credit score over 800 is already going to be enough to qualify for all of the perks related to great credit.
For example, not too long ago I applied for a new credit card from Chase. Not only did I get approved instantly online, but I also received the lowest possible annual percentage rate (APR). In contrast, some of my oldest cards still have their original APRs that are easily 5 to 10 percentage points higher than the rates I'm now being offered.
What you can do
Although I'm not terribly concerned about speeding up my ascent to 850, the limitations of a short credit history could be more troublesome for folks with lower credit scores, especially if you're on the verge of the next credit tier. If this is you, a workaround may be available.
Specifically, you can effectively "borrow" the well-aged credit history of a friend or family member by becoming an authorized user on one of their credit cards. In most cases, the payment history of a card will be reported to the credit bureaus for both the primary cardholder and the authorized user.
If you're added onto the account of a card with a long, positive payment history, you can benefit from that history. This could boost both the length of your overall credit history and the average age of your accounts.
In the end, of course, your credit history age is only a relatively small portion of your credit scores. As long as you pay all of your bills on time and maintain low credit card balances, your credit score should continue to increase over time.
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