Length of Credit History is Too Short

When creditors evaluate your credit applications, they are looking for positive repayment habits. While bad credit can block new credit, having too short a credit history can also prevent many types of credit applications from being approved.

“Length of Credit History is Too Short” Credit Score Risk Factor Codes
Equifax 14
Experian 14
TransUnion 14
NextGen J0

This may appear as “length of time accounts have been established.” This is referring to your overall credit history and includes all types of credit accounts. There is a related risk code that penalizes you if your credit history on revolving accounts is too short.

What lenders are essentially looking for is an established credit history where there is clearly a proven track record of paying accounts on time. The longer your credit history, the easier it is for lenders to predict your future repayment of a credit account. Duration of credit history accounts for 15% of FICO credit scoring formulas.

Many consumers mistakenly believe that having limited credit is the same as having bad credit. This is not true. Bad credit proves that you have failed to uphold your end of a credit contract. A short credit history only means that you have yet to prove anything, good or bad.

Some lines of credit will be completely off limits when you have a brief credit history. This may include certain mortgage products or preferred credit card products.

Other lines of credit may still be available to you. Store cards or secured credit cards may still be an option for you if you have yet to establish a lengthy credit history.

When you are approved for credit, it is likely that your lack of an established credit history will result in higher interest rates. Lower rates will become available as you prove your creditworthiness.

This higher cost is similar to the increase that an inexperienced driver has to pay when purchasing car insurance. They have made no driving errors, yet they must pay more because their classification is that of a riskier group.

Inexperienced borrowers tend to have high rates of default and missed payments. Even if you never miss a payment, you will still have to borrow at higher rates initially until you can prove that you are a low risk to the lender.

When you carry the short credit history label, understand that opening new accounts does not improve your situation in the short term. Instead, maintaining your existing credit accounts will help you grow out of this classification. As long as you have a good mix of revolving and installment accounts, you can likely avoid adding new credit accounts for a while.

Length of credit history is too short is credit bureau risk score reason 14. It may also appear as “length of time accounts have been established.” NextGen scores assign code J0 for this factor. For more information on credit scoring, see the complete list of credit score factors.

Kenneth Long
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Kenneth Long

President at Debtors Unite
Kenneth Long is President of Debtors Unite, Inc. as well as President and Vice Chairman for Vision Credit Education, Inc. He served as a regional coordinator for the North Carolina Saves campaign. Long co-founded the Wake EITC Coalition along with Family Resource Center of Raleigh.

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
Kenneth Long
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