topic Re: Closing Aged Accounts.. Yes It Is Ok in Understanding FICO® Scoring

Closing Aged Accounts.. Yes It Is Ok

Tuscani — Fri, 08 Jun 2007 03:55:53 GMT

It has always been common knowledge that closing aged accounts will hurt your scores. I myself (and many others) have always believed that this due to one losing age now that the TL is closed. This in fact is not true.

Revolving utilization is the only area of scoring where closing an account can hurt you (at least in the short term). Closed accounts with a revolving balance is still counted against utilization; however, a closed account with a no balance would not be.

In terms of credit history, closed accounts are treated no differently than open accounts. Meaning, the age on a closed account that let's say is 20 years old gets counted the same as an account that was closed six months ago. In fact, the length of credit history gets counted for every TL on your report, regardless.

Keep in mind that closed accounts in good standing are generally removed from your credit report after 10 years, whereas an open account in good standing can remain indefinitely.

Lets recap... In the short term, the only harm by closing a revolving account is due to the utilization percentage you lose, while over the long term, a closed account will be removed from your credit file after 10 years, which could lower your score due to the loss of history.

Re: Closing Aged Accounts.. Yes It Is Ok

ilovepizza — Fri, 08 Jun 2007 04:31:56 GMT

So then closing a new account does not help you regain an older average age of accounts either. It is then the total of all revolving accounts open and closed that make up the average age. Then there really is no advantage of closing a new account that is "older" than "12 months". And also no advantage of keeping it either. Either way once you have the account it effects the score the same open or closed provided it is at least 12 months or older. (not discussing accounts under 12 months old) :-)

And I am discussing average age only. Not credit lines, UTL, ect.

Message Edited by ilovepizza on 06-07-2007 09:31 PM

Re: Closing Aged Accounts.. Yes It Is Ok

Tuscani — Fri, 08 Jun 2007 05:07:17 GMT

ilovepizza wrote:
So then closing a new account does not help you regain an older average age of accounts either. It is then the total of all revolving accounts open and closed that make up the average age. Then there really is no advantage of closing a new account that is "older" than "12 months". And also no advantage of keeping it either. Either way once you have the account it effects the score the same open or closed provided it is at least 12 months or older. (not discussing accounts under 12 months old) :-)

And I am discussing average age only. Not credit lines, UTL, ect.

Message Edited by ilovepizza on 06-07-2007 09:31 PM

Correct!

Re: Closing Aged Accounts.. Yes It Is Ok

Jay1987 — Fri, 08 Jun 2007 13:46:42 GMT

Curious.

Did you find this out from personal experience, or did you read it somewhere?

Re: Closing Aged Accounts.. Yes It Is Ok

Tuscani — Fri, 08 Jun 2007 13:50:02 GMT

Jay1987 wrote:
Curious.

Did you find this out from personal experience, or did you read it somewhere?

Let's just say it was a credible source. :)

Re: Closing Aged Accounts.. Yes It Is Ok

ObsessedwithmyFico — Fri, 08 Jun 2007 14:44:19 GMT

So you are saying it is ok to close those three CAP1 accounts with the annual fees once I obtain AMEX even if those are my oldest accounts (approx 5 years)?

Re: Closing Aged Accounts.. Yes It Is Ok

Tuscani — Fri, 08 Jun 2007 15:08:15 GMT

ObsessedwithmyFico wrote:
So you are saying it is ok to close those three CAP1 accounts with the annual fees once I obtain AMEX even if those are my oldest accounts (approx 5 years)?

In terms of worrying about lost age, yes. But losing whatever util the cards are providing could hurt you.

Re: Closing Aged Accounts.. Yes It Is Ok

MidnightVoice — Fri, 08 Jun 2007 16:25:21 GMT

TU tells me I am a good boy because I have an established credit history AND an established revolving credit history

EX says that despite 20+ accounts, most of them over 10 years old, I have a short credit history.

The difference? TU reports two open credit lines of 10+ years, EX reports only one. All the other old accounts are the same.

Hmmmmmm

Re: Closing Aged Accounts.. Yes It Is Ok

smallfry — Fri, 08 Jun 2007 20:01:14 GMT

Tuscani wrote:

Jay1987 wrote:
Curious.
Did you find this out from personal experience, or did you read it somewhere?

Let's just say it was a credible source. :)

Gee. I wonder who? LOL. Thanks there is a lot of confusion out there amongst some very knowledgeable people on this subject. So to break it down you just add up all the accounts both open and closed. For the sake of discussion we can use months since opened not years. Then divide it by the number of accounts and there is your average age. All accounts are weighted equally? Car loans credit cards mortgage etc etc. Correct?

Re: Closing Aged Accounts.. Yes It Is Ok

ilovepizza — Fri, 08 Jun 2007 23:30:42 GMT

smallfry wrote:

Tuscani wrote:

Jay1987 wrote:
Curious.
Did you find this out from personal experience, or did you read it somewhere?

Let's just say it was a credible source. :)

Gee. I wonder who? LOL. Thanks there is a lot of confusion out there amongst some very knowledgeable people on this subject. So to break it down you just add up all the accounts both open and closed. For the sake of discussion we can use months since opened not years. Then divide it by the number of accounts and there is your average age. All accounts are weighted equally? Car loans credit cards mortgage etc etc. Correct?

Accounts are broken in to groups. Revolving, Installments, ect. The average age of accounts refers to revolving when discussing credit cards, charge cards and retail cards. Installments are graded differently and do not count against average revolving age. :-)

Re: Closing Aged Accounts.. Yes It Is Ok

tommy123 — Tue, 31 Jul 2007 14:52:59 GMT

I disagree.

On my CR, the closed account has a credit limit of $0. So in short term, it does have a neg impact.

on long term, there is another impact, it reduces my acccount age when it's removed.

Re: Closing Aged Accounts.. No it is not OK

stu — Tue, 31 Jul 2007 15:55:14 GMT

Personal experience: I closed 6 credit card accounts that I had for over 10 years. My credit score dropped 35 points. It has been 1 year since this happened and it has not yet risen to the same level as before the cancellations. I charge about 10k / mo. on cards and carry no debt.

You can talk your credit card companies into waiving the annual fees.

I will never cancell a card again!

Re: Closing Aged Accounts.. Yes It Is Ok

deemonee — Tue, 31 Jul 2007 16:09:33 GMT

It can hurt you if you do not have a lot of credit. I'm 22 years old so for me to close an account is a bad idea because the ratio of having credit versus not having credit. I have a better explanation for it but I'm at work and can't talk much about it!

Re: Closing Aged Accounts.. Yes It Is Ok

Stiles — Tue, 31 Jul 2007 16:16:39 GMT

So will closing accounts with smaller balances help? It is my understanding that cards with small available credit lines and not looked upon favorably.

Re: Closing Aged Accounts.. Yes It Is Ok

Stiles — Tue, 31 Jul 2007 16:16:47 GMT

Re: Closing Aged Accounts.. Yes It Is Ok

scorecrazybob — Tue, 31 Jul 2007 16:35:06 GMT

Is it better to have them close the account because of inactivity or for you to close it?

Re: Closing Aged Accounts.. Yes It Is Ok

Tuscani — Tue, 31 Jul 2007 17:12:46 GMT

scorecrazybob wrote:
Is it better to have them close the account because of inactivity or for you to close it?

Makes no difference to your score.

Re: Closing Aged Accounts.. Yes It Is Ok

Tuscani — Tue, 31 Jul 2007 17:13:29 GMT

Stiles wrote:

So will closing accounts with smaller balances help? It is my understanding that cards with small available credit lines and not looked upon favorably.

You want $0 balance on closed accounts.

Message Edited by Tuscani on 07-31-2007 12:13 PM

Re: Closing Aged Accounts.. Yes It Is Ok

Tuscani — Tue, 31 Jul 2007 17:15:05 GMT

deemonee wrote:
It can hurt you if you do not have a lot of credit. I'm 22 years old so for me to close an account is a bad idea because the ratio of having credit versus not having credit. I have a better explanation for it but I'm at work and can't talk much about it!

Remember.. this thread addresses the worry of lost age and closing accounts.. util still applies no matter if the account is closed or open.

Re: Closing Aged Accounts.. Yes It Is Ok

masdeocho — Tue, 31 Jul 2007 17:30:17 GMT

OK, tell me if I've got this right:

Say I have a five-year old card. I close it today. Two years from today, does it count towards my history as a seven-year old card? It's not frozen in time today when I close it as a five-year old?