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Established Member
Conc
Posts: 10
Registered: ‎05-21-2007
0

Closing New Accounts

I see that the general recommendation here is to not close accounts, one because your total credit line will drop and two because you're cutting off your credit history.
 
But what if the card you'd like to close is only a few months old and your total credit line is high? I have 16 active cards now and $54,700 in available credit. Closing this new card would drop that by $3600 (and give me one less card to keep track of). I have essentially no outstanding debt on these cards, so the UTL is minimal to none. In other words, I don't see the drop in total available credit as having much impact. On the other hand, my limited account history hurts me.
 
My goal here would be to improve my average account length, which as it stands is 3 years. My oldest accounts are 6 years old. In the last year and a half, I've only opened 1 account, which was 4 months ago. Will closing this account increase my average account length and potentially improve my score in the history component? What would you do in this situation?
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
0

Re: Closing New Accounts

in this situation closing out the account would be fine.
Senior Contributor
ilovepizza
Posts: 3,071
Registered: ‎05-17-2007
0

Re: Closing New Accounts

[ Edited ]
It should be ok to close it in this case.

When I close new account (very new as in a couple months) for reasons where I don't like the bank or something, I ask the bank to remove the card from my CRAs. I don't even want it showing it existed. I would only do this for a very new card. I have to eat the inquiry.

Message Edited by ilovepizza on 06-25-2007 10:37 AM
If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Senior Contributor
smallfry
Posts: 4,831
Registered: ‎04-20-2007
0

Re: Closing New Accounts

If it is a prime name I wouldn't close the card. Through years of use you might be able to CLI this card to a nice limit. Is it Chase or BOA CITI something like that or is it Household or one of the other sub-prime/wanna be prime names? $3600 is nothing to sneeze at.
Established Member
Conc
Posts: 10
Registered: ‎05-21-2007
0

Re: Closing New Accounts

It's a Citi card. I opened it because it had a 0% introductory APR for a year, I believe.
Regular Contributor
Skiffy
Posts: 252
Registered: ‎03-16-2007
0

Re: Closing New Accounts

So if you're going for average age, consider this.

Closing it will mean it'll continue to report an additional 10 years, but with only 1 year of age.

For my sanity's sake, let's say you have three cards and the other two have been open for three years.

If you left the account open, your average age of accounts in 10 years will be 12.3 years.

If you close the account, your average age in 10 years will be 9 years.
Moderator Emeritus
fused
Posts: 16,310
Registered: ‎03-12-2007
0

Re: Closing New Accounts

I agree with Tuscani on this one.  Also, if util % is virtually unchanged, closing the account will not decrease scores since closed positive CC TLs still weight a lot in scoring just as open ones do.
Credit Profile -
FICO 08 Scores (08-15-2014): EQ 820, EX 817, TU 814
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26+ years ~ AAoA: 12 years ~ Util: 1% ~ Inqs: EX 1 (Amex 07-15-2014)

Credit Cards -
Amex BCP 25K ~ Amex Clear 25K ~ Amex Platinum NPSL ~ Chase Freedom Visa 19.3K ~ CITI Dividend World Mastercard 20.3K ~ FIA Fidelity Investments Platinum Plus Visa 40K ~ A Gold Visa with my local bank 10K
Established Member
Conc
Posts: 10
Registered: ‎05-21-2007
0

Re: Closing New Accounts

Skiffy,
 
You say that the card will continue to report with 1 year of age if I close it now. Isn't this the point of closing it, so the age is no longer factored into the average age?
Senior Contributor
smallfry
Posts: 4,831
Registered: ‎04-20-2007
0

Re: Closing New Accounts



Conc wrote:
Skiffy,
You say that the card will continue to report with 1 year of age if I close it now. Isn't this the point of closing it, so the age is no longer factored into the average age?



Closed and open accounts both are figured in the equation for your average age.
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
0

Re: Closing New Accounts

[ Edited ]


smallfry wrote:


Conc wrote:
Skiffy,
You say that the card will continue to report with 1 year of age if I close it now. Isn't this the point of closing it, so the age is no longer factored into the average age?



Closed and open accounts both are figured in the equation for your average age.


Correct. And the only area of scoring where closing an account can hurt you is in the revolving utilization calculations. While a closed revolving account with a balance is included in utilization, a closed account with a zero balance is not.
 
In the area of length of credit history, closed accounts are treated no differently than open accounts.  That is, the length of history on a closed acct still gets counted right along with the rest of the closed account's history.  In fact, the length of credit history gets counted for every trade line on your report, regardless.
 

So, the only harm by closing a revolving account is to the utilization percentage, while, in the long run, a closed account will be removed from your credit file after 10 years, which could lower your score at that time due to the loss of that history.



Message Edited by Tuscani on 06-29-2007 06:05 AM

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