How much credit history do you really need?

The further back your credit history goes, particularly if it’s a good credit history, the better it is for your overall score and your borrowing options.

Here are some quick facts about credit history and different ways to boost your score:

The starting point

In order to start building a credit score, you must have an account that reports your payment history and balance to one of the three big credit bureaus: TransUnion, Experian and Equifax.

You need at least six months of credit history to qualify for a FICO credit score — which is the most common scoring metric. Your credit history makes up 15% of your FICO score.

Six months is pretty much the bare minimum in terms of credit history. In many cases, lenders consider anything between two to four years of history a good starting point. A solid history that will count as a positive in your favor is about 10 years of good credit.

What is a good credit score?

Credit scores from 580 to 669 are typically considered fair. A score of 670 to 739 is considered good; 740 to 799 is seen as very good; and 800 and higher is considered excellent. If you’re just starting out building your credit, a score in the low 700s is a good target to aim for.

When you begin building credit, however, you don’t start with a 0 or a very low number like 300.

Precisely how credit is scored is the stuff of complicated algorithms and trade secrets, but there are things we know help it go up: pay your bills on time, don’t carry a big balance and don’t open too many accounts too close together.

With that said, here are some other ways to build your credit score.

Looking to keep building up your credit and get some rewards at the same time? You can get a no-fee, cash-back Visa card to do exactly that.

How time affects your credit score

Having older credit accounts with a good payment history shows lenders that you’re responsible with your financial obligations. But lenders will also look at other things, like the number of accounts you have and their average age.

Your overall credit history is tied pretty closely to the things you’d expect: Payment history, the amount of debt you’re carrying and new accounts you’ve opened recently. There are many factors that go into calculating your credit score, but hanging on to an older credit card you still use and shows a strong payment history is a good idea.

The other aspect to consider is the average age of your accounts. This is determined by just adding the age of each account and dividing it by the number of accounts.

Let’s say you have four credit cards: one is 12 years old, one is 7 years old, one is 4 years old and the newest is one year old. If you add up those ages (12 + 7 + 4 + 1 = 24) and divide that by the number of cards (four) you get an average account age of six years.

As you can see, every new credit card or account you add will lower the average age. And a slew of new accounts will lower it very quickly. And as far as lenders are concerned, the older the age the better, so it’s a great reason to steer clear of opening new cards too often.

Building a good score