topic Re: How exactly does closing a card affect my credit score? in Understanding FICO® Scoring

How exactly does closing a card affect my credit score?

jdbkiang — Mon, 12 Nov 2018 02:08:12 GMT

I've searched this question through and through and can't seem to get a definite answer, so I was hoping the MyFico experts could help me out.

What effect does closing a card have on my credit score? I've seen that it will continue to report for 10 years, so does this mean that the AAoA will stay the same? What if it's my oldest card? Since it will continue to report for 10 years, will my AoOA also stay the same for 10 years? Also, do lenders look at closed cards negatively? Will closing a couple cards here and there affect my chances of getting other cards? I know Amex requires you to keep cards for at least a year before closing, otherwise they'll clawback your SUB. Do they do this for co-branded cards as well?

If closing a card doesn't affect the age of my accounts for 10 years, will it affect my score in and of itself, given that utilization isn't at issue?

Re: How exactly does closing a card affect my credit score?

Anonymous — Mon, 12 Nov 2018 03:23:38 GMT

Closing a card will have no impact on your credit scores.

Your AAoA will continue to grow with the card closed by 1 month/mo. If the card is your oldest account, your AoOA will continue to grow by 1 month/mo as well. Whenever the accounts falls off your reports (typically 10 years down the road) your AAoA will drop and if it's your oldest account your AoOA will drop to the age of your next oldest account. At that time it's possible that you could see a slight score drop related to these age of accounts factors.

Re: How exactly does closing a card affect my credit score?

jdbkiang — Mon, 12 Nov 2018 04:19:36 GMT

@Anonymous wrote:
Closing a card will have no impact on your credit scores.

Your AAoA will continue to grow with the card closed by 1 month/mo. If the card is your oldest account, your AoOA will continue to grow by 1 month/mo as well. Whenever the accounts falls off your reports (typically 10 years down the road) your AAoA will drop and if it's your oldest account your AoOA will drop to the age of your next oldest account. At that time it's possible that you could see a slight score drop related to these age of accounts factors.

Thanks for the answer. Okay, so closing a card in and of itself doesn't affect your credit score. How do lenders view closed cards? Do they stand out and are they viewed negatively?

Also, given that at that point, the age of your accounts is likely around 10~ ish years, the score drop probably isn't much, if any, correct?

Re: How exactly does closing a card affect my credit score?

Anonymous — Mon, 12 Nov 2018 06:05:43 GMT

@jdbkiang wrote:
@Anonymous wrote:
Closing a card will have no impact on your credit scores.

Your AAoA will continue to grow with the card closed by 1 month/mo. If the card is your oldest account, your AoOA will continue to grow by 1 month/mo as well. Whenever the accounts falls off your reports (typically 10 years down the road) your AAoA will drop and if it's your oldest account your AoOA will drop to the age of your next oldest account. At that time it's possible that you could see a slight score drop related to these age of accounts factors.
Thanks for the answer. Okay, so closing a card in and of itself doesn't affect your credit score. How do lenders view closed cards? Do they stand out and are they viewed negatively?

Also, given that at that point, the age of your accounts is likely around 10~ ish years, the score drop probably isn't much, if any, correct?

Not necessarily. Suppose Bob has exactly one 20 year old credit card and no other cards (except maybe a couple closed auto loans). He discovers these forums and begins applying for really good rewards cards and closes his old CU card, since he isn't using it any more. When the old card falls off, his Age of Oldest Account will go from 30 to 10 (not good at all for his score). If the old card is deleted at year four instead of year ten (which could happen) then his AoOA will ge from 24 to 4... a very precipitous drop. Losing an extremely old account will affect his AAoA as well.

Bob as described is not fictional. I have seen a lot of Bobs in the last few years with exactly this story.

Re: How exactly does closing a card affect my credit score?

jdbkiang — Mon, 12 Nov 2018 07:05:29 GMT

@Anonymous wrote:
@jdbkiang wrote:
@Anonymous wrote:
Closing a card will have no impact on your credit scores.

Your AAoA will continue to grow with the card closed by 1 month/mo. If the card is your oldest account, your AoOA will continue to grow by 1 month/mo as well. Whenever the accounts falls off your reports (typically 10 years down the road) your AAoA will drop and if it's your oldest account your AoOA will drop to the age of your next oldest account. At that time it's possible that you could see a slight score drop related to these age of accounts factors.
Thanks for the answer. Okay, so closing a card in and of itself doesn't affect your credit score. How do lenders view closed cards? Do they stand out and are they viewed negatively?

Also, given that at that point, the age of your accounts is likely around 10~ ish years, the score drop probably isn't much, if any, correct?
Not necessarily. Suppose Bob has exactly one 20 year old credit card and no other cards (except maybe a couple closed auto loans). He discovers these forums and begins applying for really good rewards cards and closes his old CU card, since he isn't using it any more. When the old card falls off, his Age of Oldest Account will go from 30 to 10 (not good at all for his score). If the old card is deleted at year four instead of year ten (which could happen) then his AoOA will ge from 24 to 4... a very precipitous drop. Losing an extremely old account will affect his AAoA as well.

Bob as described is not fictional. I have seen a lot of Bobs in the last few years with exactly this story.

I see, that's good to know. Thanks for the heads-up, I won't be Bob, hopefully. Btw, at what point does AAoA stop mattering? I kind of assumed that with an AAoA above 10, even if it were to drop from 20 wouldn't be much of an issue.

That being said, do card closures affect new card apps?

Re: How exactly does closing a card affect my credit score?

Anonymous — Mon, 12 Nov 2018 14:28:20 GMT

The illustration that CGID painted above comes down to one factor, file thickness. The thicker your file, the less impact seen to your age of accounts factors when an old account falls off. The example given with Bob is one of a non-thick file. You have to consider your own file thickness to determine how an old account falling off may impact it in the future.

Most believe that maximum FICO points related to AAoA are realized around 7.5-7.6 years AAoA. That being said, any drop from a very high AAoA (say 20 years) to something > 7.6 years (say 10 years) wouldn't impact score.

Card closures do not impact new card apps, so long as the closures are on clean accounts. People close CCs down all the time and they also get closed by issuers due to non-use. As long as they are clean acccounts, why they are closed doesn't matter. Dirty accounts closed down by issuers can definitely be a concern of course... but it's not that the account is closed really, it's just that it's dirty. The same account (dirty) even if it was still open would be viewed equally as bad by a lender.

Re: How exactly does closing a card affect my credit score?

Anonymous — Mon, 12 Nov 2018 15:20:39 GMT

Note that, in the case of Bob, the chief factor being affected is Age of Oldest Account (AoOA), not AAoA. I think I added a side comment that in addition to the scenario hurting AoOA, it would also affect AAoA (to a lesser degree).

Re: How exactly does closing a card affect my credit score?

jdbkiang — Tue, 13 Nov 2018 08:09:33 GMT

@Anonymous wrote:
Note that, in the case of Bob, the chief factor being affected is Age of Oldest Account (AoOA), not AAoA. I think I added a side comment that in addition to the scenario hurting AoOA, it would also affect AAoA (to a lesser degree).

I see. So just to confirm, both AoOA and AAoA will be affected, but with a relatively thick file, the AAoA effect won't be as noticeable, where as if your second card is much younger than your oldest, the AoOA will take a bigger hit and therefore have a larger impact, right?

Thanks, BBS for the clear answer as well. That's comforting to hear, and I'll likely be closing my SW Premier card soon. As a side question, will they refund the AF? It was charged to me less than 2 weeks ago.

Re: How exactly does closing a card affect my credit score?

Anonymous — Tue, 13 Nov 2018 13:19:55 GMT

Neither AoOA or AAoA is impacted immediately; The impact to either/both happens when the account falls off of your CR, typically 10 years down the road after account closure. A lot can change with your file over the course of a decade. Your second oldest account if still open will be 10 years older. Your AAoA will most likely increase over that time, depending on how many accounts you open over the course of 10 years. Those additional accounts, though, thicken your file and will reduce the adverse AAoA impact when your old account does fall off at some point.

I can't really comment on your AF, but it definitely doesn't hurt to ask.

Re: How exactly does closing a card affect my credit score?

jdbkiang — Tue, 13 Nov 2018 21:50:41 GMT

@Anonymous wrote:
Neither AoOA or AAoA is impacted immediately; The impact to either/both happens when the account falls off of your CR, typically 10 years down the road after account closure. A lot can change with your file over the course of a decade. Your second oldest account if still open will be 10 years older. Your AAoA will most likely increase over that time, depending on how many accounts you open over the course of 10 years. Those additional accounts, though, thicken your file and will reduce the adverse AAoA impact when your old account does fall off at some point.

I can't really comment on your AF, but it definitely doesn't hurt to ask.

Thank you so much for the clarifications. I appreciate it a lot!

As a follow-up, are AU accounts counted in the account age as well? I had a friend added on as AU with no cards of his own, but when he applies, he keeps getting told he doesn't have enough consumer credit.

Re: How exactly does closing a card affect my credit score?

Anonymous — Tue, 13 Nov 2018 22:16:01 GMT

Sometimes AU accounts "count" and sometimes they don't. Does your account show up on his CR?

Not having "enough" consumer credit could be referring to one of two things, possibly both. One could be referring to length of credit, meaning that his file is too young... that points to AoOA and AAoA. Two, it could be referring to file thickness... that points to not enough accounts being present, meaning that his file is "thin" and thus he's a greater risk.

Re: How exactly does closing a card affect my credit score?

jdbkiang — Wed, 14 Nov 2018 06:53:26 GMT

@Anonymous wrote:
Sometimes AU accounts "count" and sometimes they don't. Does your account show up on his CR?

Not having "enough" consumer credit could be referring to one of two things, possibly both. One could be referring to length of credit, meaning that his file is too young... that points to AoOA and AAoA. Two, it could be referring to file thickness... that points to not enough accounts being present, meaning that his file is "thin" and thus he's a greater risk.

They do show up on his CR. I added him as AU to 3 cards on my account, all at least a year old, with the oldest about 2 years. However, that's all he has on his file. Outside of those 3 accounts, the only other things that show up are a couple inquiries. I had him apply for a couple cards after the AU's reported, but they were all denied. After calling Amex recon this morning, the CSR said that AU accounts wouldn't help his file at all. I was pretty surprised to hear that, so now I'm slightly confused as far as how to move forward.

Re: How exactly does closing a card affect my credit score?

Anonymous — Wed, 14 Nov 2018 07:02:51 GMT

That's not surprising at all, Chase also does not consider AU accounts and I'm sure they're not alone. The best course of action is a couple of secured cards (Discover for sure) and sit on them, wait for his FICO to generate after 6 months then check various prequal site for unsecured offerings, if nothing then wait another six months, by then the secured cards should have graduated. Don't be tempted by predatory lenders like Credit One and First Premier.

Re: How exactly does closing a card affect my credit score?

jdbkiang — Wed, 14 Nov 2018 07:35:34 GMT

@Anonymous wrote:
That's not surprising at all, Chase also does not consider AU accounts and I'm sure they're not alone. The best course of action is a couple of secured cards (Discover for sure) and sit on them, wait for his FICO to generate after 6 months then check various prequal site for unsecured offerings, if nothing then wait another six months, by then the secured cards should have graduated. Don't be tempted by predatory lenders like Credit One and First Premier.

But...Amex and Chase both offered my brother cards solely after being added as AU as well. He had no other history either.

Re: How exactly does closing a card affect my credit score?

Anonymous — Wed, 14 Nov 2018 13:52:07 GMT

What do you mean by "offered?" In what way? Do you mean through the pre-qual site, a targeted offer, or something else?

Re: How exactly does closing a card affect my credit score?

Anonymous — Wed, 14 Nov 2018 17:01:21 GMT

@jdbkiang wrote:
@Anonymous wrote:
That's not surprising at all, Chase also does not consider AU accounts and I'm sure they're not alone. The best course of action is a couple of secured cards (Discover for sure) and sit on them, wait for his FICO to generate after 6 months then check various prequal site for unsecured offerings, if nothing then wait another six months, by then the secured cards should have graduated. Don't be tempted by predatory lenders like Credit One and First Premier.
But...Amex and Chase both offered my brother cards solely after being added as AU as well. He had no other history either.

Then your brother is an exception to the norm, it's well documented on here that Chase will not consider AU accounts and typically wants to see 1 year of own revolving history, perhaps he has high income compared to your friend?

Re: How exactly does closing a card affect my credit score?

Anonymous — Wed, 14 Nov 2018 18:06:15 GMT

@jdbkiang wrote:
As a follow-up, are AU accounts counted in the account age as well? I had a friend added on as AU with no cards of his own, but when he applies, he keeps getting told he doesn't have enough consumer credit.

FICO 8 has built into it a secret proprietary "anti-abuse" module that attempts to sort out people who are legitimate AUs (children, spouses), fairly legitimate AUs (brothers, nieces, etc.), dubious AUs (friends) and totally illegitimate AUs (strangers).

You mention that your brother (who likely has the same last name as yourself) was apparently recognized by FICO 8 as a legitimate AU, but your friend was not. This is not surprising.

Also, by the time you added your friend, FICO may have been able to see that you were adding lots of AUs in a short period of time, none of whom were your spouse or child. The AA module is secret and may rely on data mining techniques that go beyond what is explicitly on your credit report.

Here is an excerpt of what you said about you and your friend:

I added him as AU to 3 cards on my account, all at least a year old, with the oldest about 2 years. However, that's all he has on his file. Outside of those 3 accounts, the only other things that show up are a couple inquiries. I had him apply for a couple cards after the AU's reported, but they were all denied. After calling Amex recon this morning, the CSR said that AU accounts wouldn't help his file at all. I was pretty surprised to hear that, so now I'm slightly confused as far as how to move forward.

You may want to adjust how you are seeing things in two ways. First, you and your friend have the perception that he can be added as an AU to a few young cards and immediately be eligible for some of the top flight issuers (e.g. Amex). He and you should lower your expectations and have a much more relaxed and longer timeframe.

Second, you perceive that it is your job to figure out how to move forward on his credit journey. It is not.

Best wishes!

Re: How exactly does closing a card affect my credit score?

HeavenOhio — Wed, 14 Nov 2018 21:00:06 GMT

@Anonymous wrote:
Then your brother is an exception to the norm, it's well documented on here that Chase will not consider AU accounts and typically wants to see 1 year of own revolving history, perhaps he has high income compared to your friend?

Chase does consider AU's — in a negative way — when they compute one's 5/24 standing. In other words, they won't help, but they might hurt.

Re: How exactly does closing a card affect my credit score?

Anonymous — Wed, 14 Nov 2018 21:08:57 GMT

That's true, forgot about 5/24.

Re: How exactly does closing a card affect my credit score?

jdbkiang — Thu, 15 Nov 2018 02:39:32 GMT

@Anonymous wrote:
What do you mean by "offered?" In what way? Do you mean through the pre-qual site, a targeted offer, or something else?

Sorry, should've been clearer. He was able to receive cards from Amex and Chase after applying, based on the AU's. In fact, I myself got the CSR+CFU based mainly on AU's as well. I only had a Sears MC for 3 months before then, so it was simply my assumption based on experience that AU's would help a thin/new file. My income, my brother's, and my friend's income weren't all that different at the time of applying.

And yes, Heavenly, I appreciate the reminder. Just trying to help a friend.