What to do with unused credit?

[Anonymous]

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@Anonymous wrote:
I have never really understood the "close it" mentality. When all these accounts that get closed fall off your credit report in 10 years, you will have a major dip in your average age of accounts. Sure it may not seem like a big deal now, but when your AAoA goes from say 10-20 years to say 5 years, you will probably kick yourself for closing "unneeded" accounts.

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If you have four cards, three which were just opened today, and one which is 10 years old and you close today, then in ten years time when it falls off, your AAoA drops from 12.5 years to 10 years.

If you make it two 10 year old cards that you close today and open two new cards, then in ten years, it would drop from 15 years to 10 years. And that's with just four cards, the effect lessens the more cards you have.

[Anonymous]

EXACTLY!!! The effect lessens with the MORE you have. If you close cards, the less you have in the future to nullify the closing effect. Thank you for pointing that out. So if the effect LESSENS with the MORE cards you have, then it makes sense to NOT CLOSE them.

[Anonymous]

If i had 3 30 year old cards and two new cards and decided to get rid of the old ones I dont use, then in 10 years from now I would go to a 10 year AAoA, instead of 28 year AAoA.

[SunriseEarth]

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@Anonymous wrote:
Fella's..this is my first post so please bear with me..
I have couple of cards with reasonable limits that have supported my AAOA so far since opening in 2007. US cash+ (14k), Freedom (11k), DCU (10k), PNC (3.5k)..ov er next few years i got enticed to bonuses and got FirstTech, DiscoverIT, Amex Clear, Citi simplicity in 2013....I have already closed Citi Simplicity after i paid off balance it carried.
I have no use of PNC, FirstTech, DCU at all..PNC never did PC or CLI even with 2 HP over years. DCU/FirstTech have no rewards to use and Amex would not PC Clear to anything...
With so much hacking happening, I want to consolidate and not having to worry about checking allll my accounts to see if it is still 0 and safe. Please suggest, what cards to "Just Close" or convert to something useful. FYI, gardening since April 2013.

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One think to keep in mind is UTIL.  If closing those accounts would cause too much loss of UTIL (or not having enough accounts with zero balances), it's worth considering.

That said, I'd definitely close PNC....it's not growing, it's not affecting your UTIL much, it has no rewards and no purpose.  Of your CU cards, do either of them ever have good BT deals or a very good purchase APR?   If you, you may consider keeping one of them.   My CU card has a very lackluster rewards system, but it also has my lowest APR of 10.9%.   They frequently do BT deals (no fee, <2% APR for a set time period).   You may not have a need for BTs or a low APR card now, but it's always good to plan for the unknown.

I wouldn't close the AMEX Clear.   Call to see if you can PC to another AMEX card.   This way, you can keep the history and get something with better rewards.  AMEX Offers are also great for savings, too.  

[Kostya1992]

10 year and 28 year aaoa both get you 850 fico

[Anonymous]

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@Anonymous wrote:
If i had 3 30 year old cards and two new cards and decided to get rid of the old ones I dont use, then in 10 years from now I would go to a 10 year AAoA, instead of 28 year AAoA

Your math is off... If you have 3 30 year old cards and 2 new cards and you close 1 30 year old card today,  in 10 years your AAoA will be 25 years...

In the OPs case, it seems like he wants to close mainly newer cards. In this case, his AAoA may actually rise by closing his newer cards.

[Anonymous]

If the OP does not miss any payments and does not add a bunch of new accounts 9 years from now, it's not going to matter if his AAoA takes a little hit 10 years from now. If he has 4 cards that are 12-18 years old, a couple more that are 5-12 years old, he will have an excellent credit score and eligible for anything he wants.
Credit is there to serve you when you need it. If you want less accounts to deal with, close a couple.

[nightglider]

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@Anonymous wrote:
I have never really understood the "close it" mentality. When all these accounts that get closed fall off your credit report in 10 years, you will have a major dip in your average age of accounts. Sure it may not seem like a big deal now, but when your AAoA goes from say 10-20 years to say 5 years, you will probably kick yourself for closing "unneeded" accounts.

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You are seriously overestimating the AAoA necessary for a good score. My oldest account is 7.5 years, my AAoA is 2.8, and my oldest open TL is just over 1 year old. My TU FICO is 754 and the others can't be far behind (only difference is inqs).

[takeshi74]

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@Anonymous wrote:
I have never really understood the "close it" mentality. When all these accounts that get closed fall off your credit report in 10 years, you will have a major dip in your average age of accounts. Sure it may not seem like a big deal now, but when your AAoA goes from say 10-20 years to say 5 years, you will probably kick yourself for closing "unneeded" accounts.

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You don't understand in part because a person's open and closed accounts would have also aged in that time.  It's a call that each needs to make and it is not a one-size-fits-all matter.  If you prefer to keep everything open then definitely do so but don't assume that it's the best approach for everyone.  AAoA isn't the only consideration anyway and it's generally 15%.  If one cannot or will not actively montior all accounts then fraud is a potential concern.  The number of accounts that one can manage will vary from person to person.  I have no problems managing my 13 card but there are certainly those that prefer only having a few accounts.

I've never kept accounts open that are of no use to me and AAoA has never been an issue.  My FICO's tend to be right around 800.  I could possibly eke out more points with a higher AAoA but it's really not worth it to me as I'm already well above the 740-760 mark.  Each has to do what works for the individual.

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@Anonymous wrote:
EXACTLY!!! The effect lessens with the MORE you have. If you close cards, the less you have in the future to nullify the closing effect. Thank you for pointing that out. So if the effect LESSENS with the MORE cards you have, then it makes sense to NOT CLOSE them.

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It's an average.  Both the number of accounts and the ages of the accounts matter.  A strong AAoA can be built with a few well aged accounts.   Again, don't assume that these are one-size-fits-all matters.  If X works for you, that's great.  The next may use a different approach.

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@Anonymous wrote:
If i had 3 30 year old cards and two new cards and decided to get rid of the old ones I dont use, then in 10 years from now I would go to a 10 year AAoA, instead of 28 year AAoA.

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We create all sorts of scenarios where AAoA is drastically impacted and where AAoA is minimally impacted -- and many points in between.  One should keep AAoA in mind but, again, it's just one factor among many and one needs to keep one's entire credit profile in mind.  Any set of decisions is a matter of making improvements in one area and compromising others.  Each needs to to decide where the individual is willing to make such changes.  One simply cannot assume that the proper course of action is to always maximize AAoA regardless of other considerations.

[kdm31091]

I am in the "close if no longer useful" camp. The utilization thing is way, way overblown around here.

Yes, if you have 2 cards with 10k limits and you close one, your utilization will suffer, but if they both have zero balances, it's unclear how much your score will actually change (low util is still low util).

I can say that I've always closed cards that were useless to me and I've never seen a score drop from it whatsoever. As long as you have a few cards with moderate limits, and their util is low, you are not going to see a huge drop and likely may see absolutely no change!

The reverse has also been true for me. My Amex CLI, my QS CLIs over time, etc....they've never increased my score despite the frequent "util buffer" arguments. Sure, it's nice to have the bigger limits of course, but my score didn't suddenly shoot up because my util had been lowered, since it was already low.

The point is if your util is already low it's already low and closing worthless cards is unlikely to matter.

As for AAOA, you have an entire 10 years from the time of closing the card before it disappears. During that time, first of all your existing cards have aged ten years as well and second of all, who really knows what scoring models will care about 10 years from now? AAOA may be even less important than it is now. I will say again that despite my AAOA being dinged from new accounts, I rarely saw a score drop because of it, and if I did it was maybe 2-3 points. Since your AAOA isn't going to change immediately from the closure, I would say the eventual dip is going to be so minimal you won't even notice it.

Just close them if they're useless to you is the point.