The Risk of Closing Multiple Cards - Is It Worth It?

[Anonymous]

I currently have 30 active credit accounts. I've used every single one of them and only 5 of them have a balance, soon to be 4.

I've taken on this credit repairing journey and have had it fluctuate so much that I'm looking to take on a new angle. I've managed to get my utilization from a 58% down to 30% in a matter of 2 months. The only thing that seems to be really negatively impacting my credit scores right now is my AAoA and inquiries, although I know inquiries have little effect after so long.

My AAoA has been so low for so long that I'm finally considering closing a lot of these cards that I've managed to acquire to raise my total limits which in turn helped me to lower my utilization. I feel that the AAoA would have a much more positive effect in the long run, considering that I could always try to get CLIs and just make above minimum payments.

If I close these cards my fear is that my utilization will go back up, but I want to build up my history (age) of my credit report. Is it worth it to take this route? Any advice?

Thanks.

[Anonymous]

Maybe do it gradually? No need to dump many cards at once

[wasCB14]

Closed accounts are included in the AAoA calculation. Closing a bunch of new accounts will slow the growth of your AAoA.

ETA: I don't see any simple solution for you. Keeping track of that many accounts when you only use a few sounds like a hassle. 30% utilization is already high, so closing accounts will make your utilization worse. Your AAoA has already suffered and you won't get it back anytime soon; the question is just whether it recovers at an even slower rate (which will happen if you close a lot of accounts).

[Anonymous]

Great to know, thank you.

[Anonymous]

So basically the only way to grow it is to not apply for anything.

Also, 30 accounts is a lot, yes, but when I only carry a balance on 5 of them it's much easier to manage. I keep a secured list of all of my account logins just in case I happen to use one and need to make a payment. I also have text alerts set up should anyone happen to steal my card(s) info somehow.

[kdm31091]

I don't like feeling prisoner to credit card accounts. If 30 accounts are overwhelming for you, I'd close the ones you don't want, doing it slowly if needed so your utilization doesn't skyrocket.

AAOA is important, but only so much. It's 15% of your score. Not the most important thing by any stretch, and the closed accounts will continue  to age for 10 years post closure anyway. The only thing that will actually build up your age of accounts is the passage of time and keeping some (preferably older) accounts open.

Just keep in mind that the average consumer has 2-3 accounts and gets by just fine, so don't feel like you have to keep 30. As long as you pay your bills on time, the rest takes care of itself over time. Damage from closing accounts is pretty minor and temporary IMO.

[Revelate]

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@kdm31091 wrote:

I don't like feeling prisoner to credit card accounts. If 30 accounts are overwhelming for you, I'd close the ones you don't want, doing it slowly if needed so your utilization doesn't skyrocket.

AAOA is important, but only so much. It's 15% of your score. Not the most important thing by any stretch, and the closed accounts will continue  to age for 10 years post closure anyway. The only thing that will actually build up your age of accounts is the passage of time and keeping some (preferably older) accounts open.

Just keep in mind that the average consumer has 2-3 accounts and gets by just fine, so don't feel like you have to keep 30. As long as you pay your bills on time, the rest takes care of itself over time. Damage from closing accounts is pretty minor and temporary IMO.

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Beyond closing accounts changing the revolving utillization metrics, there's no penalty for closing an account anyway when we're talking the algorithm.  Manual review who knows but if it comes up in recon or similar I can spin it that closing the accounts was the responsible thing for me to do... pretty certain I can talk my way around that, if they even care.

Re: AAOA earlier in the thread - only way to improve that is by time passing, and yup any new account is a shortening of AAOA.  Admittedly if you have 30 accounts on your report that's what, a loss of two fifths of a month of AAOA for a new tradeline, which is pretty irrelevant.  AAOA buffering from a lot of accounts is real, and is beneficial, though I'd never encourage anyone to apply for a bunch just for that: natural card acquisition for most of the people on this forum will solve that.

Only AAOA penalty for closing accounts isn't now, it's roughly 10 years in the future when the positive tradeline gets excluded... given that one can get a perfect 850 on FICO 8 with an AAOA somewhat less than 8 years (hard to say what annual breakpoint gets us to max) it's not like people truly need astoundingly long AAOA's and that'll happen eventually for all of us who continue to use credit anyway.

Just there isn't anything instant gratification like around AAOA, but it's a somewhat minor bit anyway when one can hit 800 on two years AAOA with FICO 8  on a clean file so there are far more important things to worry about.

[wasCB14]

There's no actual penalty for closing accounts, but I wouldn't want to be in the position of having 30 cards, closing 25, and only keeping 5 open. Over the course of an entire year, AAoA would only rise by two months.

[kdm31091]

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@wasCB14 wrote:

There's no actual penalty for closing accounts, but I wouldn't want to be in the position of having 30 cards, closing 25, and only keeping 5 open. Over the course of an entire year, AAoA would only rise by two months.

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But that's not true, from my understanding. The closed accounts will continue to age and be calculated into AAOA for 10 years. So over the course of the year your AAOA is going to rise the same as it would with the accounts being open.

10 years from now, yes, it will make a bigger difference but again, AAOA isn't that big of a deal. Assuming everything else is in shape, you aren't likely going to be denied a card if your AAOA is 2 years 6 months vs 3 years, or something like that.

[wasCB14]

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@kdm31091 wrote:

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@wasCB14 wrote:

There's no actual penalty for closing accounts, but I wouldn't want to be in the position of having 30 cards, closing 25, and only keeping 5 open. Over the course of an entire year, AAoA would only rise by two months.

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But that's not true, from my understanding. The closed accounts will continue to age and be calculated into AAOA for 10 years. So over the course of the year your AAOA is going to rise the same as it would with the accounts being open.

10 years from now, yes, it will make a bigger difference but again, AAOA isn't that big of a deal. Assuming everything else is in shape, you aren't likely going to be denied a card if your AAOA is 2 years 6 months vs 3 years, or something like that.

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Hmm...if that's true, I don't see the rationale. How would a person be getting any new history or experience with an account once it's closed?