Posted by Mike Smith :: September 7, 2007 @ 7:19 am

I remember the day that I naively went into a car dealership thinking that I would have no trouble getting a car loan for a new car. I had, at least in my mind, perfect credit. I had no late payments, no debt, no negative items of any kind on my credit report. The reality of my situation back then, as a 20 year-old, was that although I had no negative items in my credit report, I really had no credit report at all.

I had made the mistake of assuming that no credit was the same thing as perfect credit. You need to remember that positive items in your credit report play at least as important a role in raising your credit score as negative items do in lowering your score. One item in particular, the length of your credit history, is perhaps the most critical factor in raising your score.

What this means is that given two people with nearly identical credit profiles, the one with a longer credit history will generally have the higher credit score. This is a main reason why authorized user accounts were used in the past. A person with a long positive credit history could add his children or spouse to the account as an authorized user, which would then generally raise that person’s credit score.

You may remember recent coverage of authorized user accounts on the Lending Club blog. Due to fraudulent use of this practice, authorized user accounts will not be factored into credit scores in the future.

What all of this means to you is that time is your ally in building your credit score. If you have a limited credit history, the earlier you start to establish your good credit, the better your credit score will likely become. It's extremely important that you stay on top of your credit, particularly when you are just starting out.

A short, bad credit history is even worse than no history at all. So start small, and start early. Use credit for items that you can easily pay off each month. As time goes by, your successful repayments will become a stronger and stronger reason for your credit score to grow.