Average Age question

[Anonymous]

Hello. My longest account is 7 years and 8 months. My average age is 3 years and 1 month. I would like to close several accounts but I’m afraid of what will happen to my credit score. I have too many credit cards that I don’t use and would like to close them. I have been a sucker for better rewards, lower interest rates or balance transfer offers. Although I don’t regret any of it, I just want to make a good choice when it comes to closing them. I did close 4 cards last month and didn’t see any negative effect on my score. I want to close another 11 cards. Any advice would be much appreciated.

[Anonymous]

Of the four cards you closed last month, were any of them your oldest open card at that time?

How many open cards do you have now?

Closing more cards should have no effect on your score assuming that these closed cards are not removed from your reports in the next several years, a fair assumption but not one you can could on with certainty.  Even if a few cards are removed prematurely (in theory they should stay on your reports for 10 years after date closed) the early deletion will have little effect unless it was your oldest account being deleted.

The caveat to all this is that you should not lower your total number of open cards to under five.  When you do that you are asking for trouble down the road when you no longer have many accounts on your report to deaden the impact of new accounts.

[SouthJamaica]

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@Anonymous wrote:
Hello. My longest account is 7 years and 8 months. My average age is 3 years and 1 month. I would like to close several accounts but I’m afraid of what will happen to my credit score. I have too many credit cards that I don’t use and would like to close them. I have been a sucker for better rewards, lower interest rates or balance transfer offers. Although I don’t regret any of it, I just want to make a good choice when it comes to closing them. I did close 4 cards last month and didn’t see any negative effect on my score. I want to close another 11 cards. Any advice would be much appreciated.

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In terms of average age of accounts it probably won't affect you, because they will still stay in your report, probably for a long time.

Closing accounts may hurt you if it increases your overall utilization percentage.

[Anonymous]

I agree with the previous replies.  Closing 11 credit cards today will have no impact on your score, the same way that closing 4 others recently also had no impact on your score.

[Anonymous]

Right now I have (hold your breath) 55 open accounts. I would like to get down to 10 cards. None of them were my oldest. Most of my oldest cards have just 4-5 years. Should I just close the ones that have 1 year or 2 years instead of closing some of the 4 or 5 year ones? I have many cards that I no longer use. For example, toys r us is going out of business. Should I keep the card open or just let them close it? Others have a lower credit limit than others. Should I close cards with lower limit to boost my average credit limit? Thank you so much for your time.

[Anonymous]

Suppose you were to close all the cards you want to close.  Would it be easy for you to keep your total utilization at < 8%? 

Remember that even if you have exactly one card with a $500 limit (no other cards) you can still have a 1% utilization and use it a lot.  You'd just have to make more frequent payments, e.g. once a week.

If you believe that you can always keep your utilization very low, then size of total credit limit may not matter muchh.

Here is what I would do.  I'd place your open credit cards in five groups.  Group one is cards you really like that you'd just hate to see closed.  Examples of cards in this group would be your two oldest open cards (whether or not you like them) and no annual fee cards that you can see yourself using a lot.

Group 5 would be crummy store cards that you never use and have low limits.

In groups 2, 3, and 4 will be cards in the middle.

Reasons to push a card into a lower group:

    * It has a monthly or annual fee

    * It has a tiny limit

    * You can't see yourself ever using it (or almost never)

    * It is a store card rather than a major credit card (major cards have a VISA, MC, Discover or Amex logo on it)

Once you have your five groups, start closing them.  First close group 5.  Then group 4.  Then group 3.  Then wait for a while and see how you feel.  After a month or two you can decide if you want to close some of the ones in group 2.  Remember that you can't re-open most cards, so wait until you know for sure before you close one.

And be certain that the balance is $0 with no possibility of extra fees (e.g. interest) before you close it.

[SouthJamaica]

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@Anonymous wrote:
Right now I have (hold your breath) 55 open accounts. I would like to get down to 10 cards. None of them were my oldest. Most of my oldest cards have just 4-5 years. Should I just close the ones that have 1 year or 2 years instead of closing some of the 4 or 5 year ones? I have many cards that I no longer use. For example, toys r us is going out of business. Should I keep the card open or just let them close it? Others have a lower credit limit than others. Should I close cards with lower limit to boost my average credit limit? Thank you so much for your time.

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As long as it won't hurt your utilization, I don't see anything wrong with closing the lower limit cards and the more useless cards.

[Kree]

I think the future aspect is important. 55 cards in 10 years time will be a mighty profile.  Then suddenly not so mighty as they fall off. Will op want 2 new cards in 2027?   with many cards, not much of an issue. With fewer cards suddenly big AAoA hit when the closed accounts fall off.

What if the cards OP keeps go out of business?  Not a big deal for 10 years, but his AoOA will never reach great heights.

Certainly trim down, just keep things in mind. Don't keep 5 chase cards when one or two would work fine as an amex or discover (not that I think chase will suddenly go bankrupt, just a randomly picked company someone might have 5 cards with.) Maybe cut out the useless cards with Annual Fees. Save those dollars. 

[Anonymous]

Great advice from CGID above regarding the division of the OPs cards into 5 groups activity.

Kree, I don't think the OPs profile would be any more "mighty" with 55 cards 10 years from now verses 15-20.  In fact, a FICO penalty is imposed when someone has too many open accounts (say, 20+) so coming down from 55 (and considerably) would actually be a good thing IMO. 

As long as the OP keeps open a handful of major bank cards, the chances of them going out of business, or going away for any reason really is slim to none.  10 years from now whether 10 cards fall off of the OPs CR or 40 cards fall off of the OPs CR, his AAoA isn't likely to be significantly different. 

Let's say his AAoA today is 2 years.  I'm not sure if that's the case, but if his oldest accounts are 4-5 years and he's got a bunch that are 1-2 years old, that may be a reasonable guess.  Let's say one of his 4 year old CCs is a major bank card that he plans to keep open.  Let's consider what potential impact to AAoA would be a decade from now if he were to close 10 cards verses 40 cards, while opening 1 account every 2 years for the next 10 years.  The the purpose of this illustration we'll have to assume that the 10 cards he closes compared to the 40 cards he closes if averaged together would result in roughly the same AAoA across those accounts.

55 accounts today, AAoA 2 years.  10 cards are closed.  10 years from now, 50 accounts are on the CR, as the 10 CCs closed will fall off but 5 accounts were added over the last decade.  AAoA would be 12 years, but slightly reduced to 11.4 years due to the 5 younger accounts [than the other 45].  

55 accounts today, AAoA 2 years.  40 cards are closed.  10 years from now, 20 accounts are on the CR, as the 40 CCs closed will fall off but 5 accounts were added over the last decade.  AAoA would be 12 years, but reduced to 10.5 years due to the 5 younger accounts [than the other 15].

So, in summary, the difference in AAoA 10 years from now in closing 40 accounts verses 10 accounts is roughly 1 year if the OP were to open 5 new accounts over the span of time.  Yes, opening more accounts than that would drop AAoA slightly more.  It's important to understand though that when it comes to FICO scoring, an AAoA of anything > 7.5 years is basically gravy and doesn't further improve score.  AAoA could drop from 12 years to 10 years or even 8 years and still be top-notch in terms of FICO scoring.  My point here is that if the OP decides he wants to close a significant amount of accounts here, 10 years from now it honestly wouldn't impact his profile much at all and with respect to FICO scoring likely not even a single point.