If you ever reviewed your credit report using Credit Karma, Wallet Hub, Nerd Wallet, etc., you may have noticed that they all break down your credit history based on the average age of credit history taken from all your trade lines combined. For example, if you have a credit card that is 10 years old, another credit card which is 3 years old, and a mortgage that is 4 years old, then Credit Karma will have your age of history at 5 years and 6 months.
What Is Credit History?
Credit history accounts for 15% of the FICO scoring model. Credit history factors in three parts (see this FICO doc).
1. How old your oldest account is,
2. How many new accounts you have (accounts less than six months old),
3. Your average age of credit history.
Average Age Of Credit History - True or False?
The “average age of credit history” is just one of three factors Fico uses to calculate your actual credit history.
In my experience, what matters most for credit history, is not having too many accounts that are less than 6 months, plus making sure your oldest account (or better, your three oldest accounts) stay open and active forever.
If you can check off those facts then you do not need to sweat about your “average age of credit history”. And more than that, in my experience, FICO usually does not look much at the “average age of credit history”.
I am not saying that opening a new credit card does not affect your credit at all. Yes, I do agree that opening a new tradeline will have an effect on your credit score, but the effect will only last for as long as the account is considered new (which is six months). After that your score will only go up, and probably even higher then what it was before!
Will Applying For A New Credit Card Affect Your Credit Score?
Every time you apply for a credit card, the bank will want to pull your credit report to see your credit history, credit score, etc. This is called a credit inquiry. A credit inquiry will show up on your report for the next two years. It makes no difference if you got approved for the credit card or not, as long as you applied for the card the inquiry will show up. Before lenders approve you for credit, they will look through your inquiries to see how many times you’ve already tried to apply for credit in the past. No one likes to lend money to someone who is running around town and asking every bank for a loan.
FICO and Vantage Score will slightly lower your credit score after you make a credit inquiry. It will go back up after about one to two months, but if you have too many credit inquiries, it may affect your score more than that. It is not recommended to have more than 5 credit inquiries in a 6 month period.
Please note that most banks will only pull one of the three credit bureaus, so if you apply for a Chase credit card, Chase pulls your Experian credit report. If you then apply for a Barclay card, Barclay will pull your Transunion report. So turns out, even though you applied for two credit cards, you still only have one credit pull on each of your credit reports (Capital One is the only large issuer that does pull all three credit bureaus.)
You can research which credit bureau each bank or credit card issuer pulls in our credit card database.
Once you get approved for the credit card, the new account will eventually get reported to the credit bureaus (depending on the bank, it can sometimes take about 30 days). Once your new account gets reported, your credit will get another blow because now you have opened a new account. Credit models will lower your score until they see that you prove yourself capable of handling the new credit account you opened.
New credit does not affect everyone equally. Someone who has less open accounts or a lot of new accounts will get more affected by a new credit card than someone who has a lot of good standing and old accounts.
I personally have never found the factor of average age of credit history to be true. But, I do agree that as long as the new account is new (less than 6 months) your score will be affected by the new account. But, once the six months go by, your score will be back to the same or even higher then it was before, regardless of what your average age of credit is now.