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Question about closed credit card accounts

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ddamage
Regular Contributor

Question about closed credit card accounts

Hello everyone.  Five months ago I got on with Greenpath debt management company because I couldn't keep up with all my credit cards (100% disabled vet who made some bad choices with credit card debt again plus a divorce after 14 yrs).  All 12 tradelines are now closed(but reporting paying on time) leaving me with no open revolving credit.  They are current for the past two years but one question I have is, Once those balances reach zero my credit score will drop right due to them being closed? Will I also lose age of credit history and have to start over?

 

Current fico 8 scores 3B report are 633, 619, and 633.

 

I did open Discover It Secured card last week assuming I will need to start the age history and needing a revolving cc.  Currently went from 98% aggregated UTI to under 68% last 3 months on the accounts with Greenpath but again I'm assuming that once all 12 tradelines are zeroed out my score will drop hard.

 

Well I'm hoping some of you have some insight and maybe any other recommendations.  Thank you and God bless.

 

 

 

 

Message 1 of 8
7 REPLIES 7
NRB525
Super Contributor

Re: Question about closed credit card accounts

The closed accounts will continue to contribute to your Age of Accounts.

If there are balances on those closed accounts, those are a different method of measure for your utilization, and I don't think they will act as an Open account would, to give you something "Open and active" on your credit report. So from that perspective, if all you had was closed accounts with balances, yes I think you would see a score penalty, since that woudl be virtually the same as "no cards reporting balances".

 

With the new Discover Secured (congrats) you can let that report a balance, and that should take care of the "open and active" card with a balance requirement.

 

The Discover Secured will begin to contribute that account aging, but I don't think you are starting over altogether. I have several closed accounts on my report, and they seem to be contributing to age calculations. They do continue to count toward aging, even when the balance is paid to zero, so it is best to continue on your efforts to get them paid down to avoid interest charges.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
April 2022 EQ=811 TU=807 EX=805 - TU VS 3.0 765
Message 2 of 8
ddamage
Regular Contributor

Re: Question about closed credit card accounts

Ok cool.  Thank you for responding.

Message 3 of 8
RobertEG
Legendary Contributor

Re: Question about closed credit card accounts

Closed revolving accounts mean that the account is no longer open to additional charges by the consumer.

It is used to limit creditor risk by preventing increase in current debt balance, and is usually done when an account has become seriously delinquent.

Closed revolving accounts can still have a debt balance that is either in good standing or delinquent.

 

The account continues to be scored in its % util in the same manner as if it were open, meaning it continues to be scored separately by the ratio of its current balance divided by its credit limit, and also continues to be included in your overall % util.

 

Once the closed account is paid to $0, then it ceases to be included in your % util scoring.

Howver, it continues to be included in your length of credit history category, such as AAOA.

Message 4 of 8
ddamage
Regular Contributor

Re: Question about closed credit card accounts


Thank you Robert.

Message 5 of 8
Iwpal7
Established Member

Re: Question about closed credit card accounts

I always thought everyone said to keep accounts open even if had a zero balance because closing an account would affect AAOA. Is that not the case? I have 6 or 7 accounts without a balance that were opened about 4 years ago. They are all store cards which I used until I rebuilt my credit. Now I have the majors I need and my score is in the mid 700s. I would love to close some of these without taking a hit to AAOA. Can I do this?
Message 6 of 8
SouthJamaica
Mega Contributor

Re: Question about closed credit card accounts


@Iwpal7 wrote:
I always thought everyone said to keep accounts open even if had a zero balance because closing an account would affect AAOA. Is that not the case? I have 6 or 7 accounts without a balance that were opened about 4 years ago. They are all store cards which I used until I rebuilt my credit. Now I have the majors I need and my score is in the mid 700s. I would love to close some of these without taking a hit to AAOA. Can I do this?

I doubt that everyone said that. A closed account continues to be counted in average age of accounts until it falls off your reports, which is usually many years down the road.  If these accounts are your oldest cards, then yes your AAoA will take a hit and Age of Oldest Account will take a hit many years down the road. It is possible for a closed card to disappear from one or more of your reports sooner than that  -- I once had 5 closed accounts disappear from Equifax within a year of their closing -- but usually they linger for quite awhile.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 7 of 8
RobertEG
Legendary Contributor

Re: Question about closed credit card accounts

Once an account that has been closed is paid off, some creditors will choose to delete the account, which then removes it entirely from all scoring.

A consumer has no control over if or when a given creditor may choose to delete a closed account, and thus while closing an account may not per se remove it from scoring, a voluntary creditor deletion will, and could happen at any time.

 

Creditors have various reasons for deleting paid, closed accounts.

It simplies their monthly reporting, and removes any issue of future consumer disputes over accuracy of any prior reporting.

It also removes time and expense in dealing with consumer good-will requests.

Message 8 of 8
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