Conundrum re: whether to close accounts

[jlkiii]

I hope someone can help me figure out the best solution to this dilemma.  I understand and accept that as a general rule keeping accounts open is in one's best interest.  However, in my case I have a total of 61 accounts (mostly due to >20 student loans that have since been consolidated to 2) and myFico says that having this many accounts is actually hurting my score.  In addition, I have a consumer finance account--closed for more almost 7 years--that is hurting my score as well.  So my questions are:  (1)  What do I do about getting dinged for too many accounts?  Since the agencies see them as positive, am I condemned to this forever or at least 10 yrs?  (2)  Will the consumer finance account drop off after 7 yrs even though it was never delinquent?  It seems that if it is being used against me it should be considered "negative" data; and, (3) Does closing an account that has been open <1yr decrease the negative impact on a score due to "a new account" (assuming that UTIL and length of credit history (>22yrs) aren't an issue?  Sorry for the "longwindedness," but I have looked far and wide for answers to these questions without any success.  Any help would be greatly appreciated.

[Anonymous]

It's a tough question. Closing the accounts may be a good idea, but which ones and so forth is a tough decision. I am a rookie in the area, but if you do decide on closing some, I would recommend the ones that have the least history, or that you have only used a couple times or even never used. Those would be the ones to affect the score the least. If you have revolving accounts that you opened just because you received a great offer, but then never used, go ahead and close those, because they aren't hurting score. Also, keep in mind that even though there are accounts on the report, not all of them are affecting your score. There may be accounts that were closed due to a lost card or account number that have been moved over to another account. It is tough to say, and you will have to go through each item and decide. Hopefully someone else has more input than me on this one.

[Tuscani]

This has always been a common misunderstanding. To be clear, while the FICO scoring formula considers the number of accounts on file and the mix of different types of accounts, it does not specifically look at the number of open vs. closed accounts.
 
In fact, FICO scores and the myFICO site have never actually had any negative factors or

explanations that refer to "open" accounts as having a negative effect, but people seem

have taken "number of accounts" to automatically mean "number of open accounts".

Also, 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.