Instantly increase your credit age by 15 years

This post originally appeared September 29, 2016 on CreditCards.com as “Being added as an authorized user can boost credit age, score

By Barry Paperno

Dear Speaking of Credit,
I currently have two credit cards open with an age of history of only 1.5 years. My parents have a credit card that’s 15 years old. If they add me as an authorized user, will the age of my credit card history go up to theirs for that card? – Jeanie

Dear Jeanie,
Significant aging isn’t usually something we aspire to, but your credit profile should.

By adding you as an authorized user, you will add length to your card history in your credit report, and that will boost your credit score. Assuming your two existing cards make up your entire credit picture, you will see a significant aging of your credit history the moment that account is added to your credit report.

Here’s how it works. Credit scoring formulas assess risk, and length of credit history is part of that assessment, since someone who has used credit successfully for a long time is a lower risk. All open and closed credit accounts (cards and loans) that appear on a credit report contribute equally to the length of credit history calculations. And that’s true whether the account is held individually, jointly or – importantly to you – as an authorized user.

How credit scores view length of credit history
There are three primary ways the FICO scoring formula looks at your length of credit history:

  1. Average account age: total number of months since each account was opened, divided by the number of accounts.
  2. Oldest account: earliest date opened.
  3. Newest account: most-recent date opened.

Again, assuming those two cards are your only accounts presently, adding your parents’ 15 year-old card to your credit file by becoming an authorized user should improve the first two of these three factors by raising the average age from 1.5 years to six years and the age of your oldest account to 15 years. The age of your most recently opened account can only be improved by the passage of time and the absence of any new openings.

Yet, as wise a move as adding this card can be for the length of history portion your score, it will still leave you far short of where the FICO “high achievers” – people with scores above 785 – stand. These consumers tend to have an average account age of 11 years, with the oldest account at 25 years, and the newest opened 28 months ago.

Questions to ask
If you are focusing solely on the effect this card is likely to have on your credit age, a scoring category making up only 15 percent of your score, you may be unaware that there are two more-influential scoring categories this card could also be impacting. Each have the potential to improve on or undo your good work. They are:

  • Payment history (35 percent of your score): can help your score when paid on time each month or lower it by more than 100 points with a single late payment.
  • Amounts owed (30 percent of your score): can help your score with low credit utilization (balance/limit percentage) or lower it by as much as 45 points if maxed-out.

Therefore, to ensure you are doing more good than harm to your score by taking on this card, get answers to the following questions before becoming an authorized user:

  • Have there been any late payments on this card in recent years?
  • Is the card’s credit utilization percentage (balance/limit) higher or lower than the combined utilization on your own two cards?

If there have been no late payments and the card’s credit utilization percentage is no higher than on your own two cards, then by all means go for it. Otherwise, hold off for now. Then perhaps revisit the idea at a later date, once any late payments age beyond the seven years that negative information stays on a credit report or the balance is paid down by enough to sufficiently reduce the utilization.

Also, note that even with a perfect payment record and minimal balance, if you ever take yourself off your parents’ card, you could lose some points once it has been removed from your credit report and can no longer contribute positively to your score.

It’s good to take advantage of legitimate scoring opportunities, like those offered by authorized user cards. It’s also good to know that micromanaging your credit is not always necessary to achieve a good score. In fact, unseasoned as your existing credit may be, those two relatively new cards could already be producing a score in the 700+ range. You can achieve that score, and the low rates that go with it, by keeping up with the basics: on-time payments every month, a credit utilization percentage below 10 percent, and no new account openings.

4 thoughts on “Instantly increase your credit age by 15 years

  1. Sarah

    Do you know which creditors report a full history to the credit bureau when u add an authorized user? I ask because discover claims they only start the history from the day that person is added not since the card has been opened. Thoughts?

    Reply
    1. Barry Paperno Post author

      Hi Sarah, This was a new one on me. I didn’t know Discover did this, so thanks for cluing me in! Yet, even with a shorter reporting period for the authorized user (AU) than the primary cardholder, they are still likely reporting enough information to make being an AU worthwhile for credit building purposes. Specifically, as long as the the open date of the account (there’s only one), the balance and credit limit appear on the AU’s credit report, that’s enough for the account to contribute positively to the AU’s score.

      Here’s how what I’m saying applies to the 5 FICO scoring categories:

      *Payment history — as long as no delinquencies are showing, it doesn’t matter how many months/years of payment history are being reported.

      *Amounts owed — only the present limit and balance are used for the all-important credit utilization calculations.

      *Length of credit history — since this is simply the number of months since the open date — and there’s only one account open date — then you’re not missing out here by being an AU.

      *New accounts — again, only the open date is used here to determine if it’s “new”.

      *Types of credit — no matter how far back the reporting goes, the fact that it’s simply a revolving account makes no difference in this category’s impact between an AU and primary cardholder.

      Reply
  2. Brian L

    How much can I expect my credit score to increase by if my average credit age is greater than 5 years? Currently, I have three open accounts that average 4.77 years. My score on Experian is 658.

    Reply
    1. Barry Paperno Post author

      Hi Brian!

      Good question. Unfortunately, predicting score changes is risky business for at least a few reasons:

      ** Your overall credit picture. Age, payment record and number of accounts are examples of the ingredients that help paint a picture of how likely it will be that you’ll pay all of your accounts as agreed in the future.

      ** The credit scoring model. Even if you could know the number of points associated with a credit report change, you would have to know this for many credit scoring models and versions. For instance, is your Experian score FICO or VantageScore or other model? And if it’s a VantageScore is it 2.0 or 3.0?

      ** Point change thresholds. Score changes for a particular factor, such as average age, don’t always occur in even-numbered or the usual intervals like 2 years, 5 years, etc. They can be 13 months, 23 months, or wherever the score development process takes things.

      What may be more important than knowing what to expect at the 5 year mark is how to ensure that your average age continues to go up, not down. To do that:

      ** Don’t open any new account that might appear on your credit report. The short age of a new account works against that average.

      ** Don’t close any cards. Here the benefit is more future than present. Closed cards tend to be removed from your credit report after 10 years. Open cards can remain for many more. Once an account is off of your report, so are all the years that were contributing to your average age.

      If there is a score bump at 5 years in the Experian score model being used, it should come pretty quickly as you’re almost there. Again, the important (if not totally obvious) thing to focus on with your score is that it’s moving in the right direction.

      -Barry

      Reply

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