Re: Closing Aged Accounts.. Yes It Is Ok
03-01-2008 11:35 AM
sonicblue wrote:All things being equal, I've done the math (not a score, just on average age), and it is to your benefit (forgetting util) to close any account whose age is LESS than your overall average age of account. Think about it, t=0: you have three accounts, ages 10, 8 and 3 years. The average age is 7 years. Ten years from now, t=10, they'll be 20, 18 and 13 years old, for an average age of 17 years.If at t=0 I close the 3 year-old account, the current average age doesn't change since they don't fall off. But at t=10, the then-13-year-old account will drop off, and my average age of account will be 19 years. This is an increase over the 17 years had I done nothing.I think the argument against is, it's a safe bet that at SOME point in that ten years, you will probably have opened something new. At an extreme, let's say you open two accounts right at t=10. Your account ages will be 20, 18, 13, 0 and 0, for an average age of 10.2. If I had closed that account, it then falls off at t=10, leaving 20, 18, 0 and 0, an average of 7.6.In the end, it seems like it's not worth it to close accounts. Keep the util, keep the history. If you're worried about fraud, call the companies and put a freeze on the account. If you really want to close accounts, close ones you've opened VERY recently, and if you're going to open anything new, do it asap. The longer you wait into the ten-year drop-off window, the more it may potentially hurt you later.
Yet another post where opening arguments start w/ advocating one thing, but a totally different conclusion is reached.
First, most people don't have the foresight to plan that afar ahead. At the 13th year, when the closed account finally drops off the report (does it, though? or will it?), the 13 year old account is going to be very, very, very valuable. 99% of the consumers are going to look back and regred closing it. Trust me on this.
Second, beyond, say 760 or 770, your score does not give you any tangible benefits. So suffering through credit-celibacy just to increase the average age to more than 5-6 is totally unnecessary IMO, and probably costly in the long run. There will always be some good opptys for credit, whether it is a new 5% reward card, some mega-benefit that you really want, or some other program, which will tip your decision in favoring of applying for credit.