Closing Aged Accounts.. Yes It Is Ok
06-07-2007 08:55 PM
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.