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The third largest factor of your FICO credit score is Length of History, which accounts for 15% of the FICO algorithm. Length of History is calculated based on the length of time you have had an active trade with a creditor. This is why credit cards are so important when it comes to building your credit.

Improving Your Length of History

If you take out a 36 or 48-month loan, that loan will help your score – until you pay it off. Once the loan is paid off, it isn’t doing anything for your credit. In contrast, when you get a credit card, whether you use it or not, that credit card is continuously helping your credit score because it is an active trade. The longer you have a credit card, the better your credit will be.

Length of History is all about loyalty. Think of it like this: Imagine that every year you stayed married, your taxable percentage went down by one percent. If you begin at 25 percent, by the time you’ve been married for 30 years, you’ll never pay taxes again!

The scenario above is an example of incentivized loyalty. Length of History works the same way. One you open a credit card, it’s essentially like you’re marrying that creditor. And every year you stay married to them, your credit score will benefit, and you’ll be building your credit!

Are you ready to start building your credit? Get your FREE credit review today!

Free Credit Review