credit score - our favorite topic!

[LS21]

example:
if i have 3 active accounts of 5,5,5 years

and i open a new account, and shortly thereafter close it,

will my average account be at 5 years or 4 (avg[5,5,5,1])?



im planning to "churn" a few CCs for FF mile bonuses

 

[dullard]

Case A) Three 5 year old cards
Case B) Three 5 year old cards and multiple new cards opened and then closed.

All the companies calculate the score differently, so there isn't one answer. But basically, the relevant parts to your credit score are:
1) How long is the history. In either case (A) or (B) the answer is the same: 5 years. There is no "average" age in this calculation.

2) How long since your newest card was opened. Clearly case (A) and (B) will vary drastically.

3) How long since each account shows activity. If you move all activity from your old cards to new cards, this might affect this portion of the score.

4) How much new credit has been issued. Case (A) will clearly differ from case (B).

5) Here is the tricky one: how is your credit history spread over time. That is, did you always pay on time over the history, or are the good years behind you, or are they happening right now, or have you never had a good history? In this aspect, the "average" age of good standing matters.

As long as you always pay things on time, only #4 should be a deterrent.

 

[SoulAssassin]

Why not just leave them open and let them age like a fine wine? 🙂 I would strongly recommend doing your app-o-rama all on the same day so plan it out well, they are becoming much more stringent with lines and applications lately. You will take a hit on your score but it will only last for a few months and then bounce right back.

 

[Xavier434]

Originally posted by: SoulAssassin
Why not just leave them open and let them age like a fine wine? 🙂 I would strongly recommend doing your app-o-rama all on the same day so plan it out well, they are becoming much more stringent with lines and applications lately. You will take a hit on your score but it will only last for a few months and then bounce right back.

There is only one potential disadvantage to that idea. The problem is not with your FICO, but rather the underwriters themselves. Some loans and other things that use your credit history take into consideration the amount of available credit you have and compare that to your income. The idea is that even though you have not used that credit, you technically could use all of it overnight. That means that if you have $75,000 in unused credit you could be $75,000 in debt tomorrow. To some, that increases the risk and lowers your chance to get a loan or whatever it is you want that is checking your credit first.

However, unless you already have a ton of unused credit available and you don't have the income to justify it, it is better just to leave the line open and let it age as you suggest.

 

[SoulAssassin]

Originally posted by: Xavier434

Originally posted by: SoulAssassin
Why not just leave them open and let them age like a fine wine? 🙂 I would strongly recommend doing your app-o-rama all on the same day so plan it out well, they are becoming much more stringent with lines and applications lately. You will take a hit on your score but it will only last for a few months and then bounce right back.

There is only one potential disadvantage to that idea. The problem is not with your FICO, but rather the underwriters themselves. Some loans and other things that use your credit history take into consideration the amount of available credit you have and compare that to your income. The idea is that even though you have not used that credit, you technically could use all of it overnight. That means that if you have $75,000 in unused credit you could be $75,000 in debt tomorrow. To some, that increases the risk and lowers your chance to get a loan or whatever it is you want that is checking your credit first.

However, unless you already have a ton of unused credit available and you don't have the income to justify it, it is better just to leave the line open and let it age as you suggest.

When that happens, which is typically only during a mortgage application, you are given the opportunity to close some accounts usually. Then after mortgage closing you can usually get them re-opened. While it certainly does happen, it's not that common and the OP only has 3 accounts. I have close to 300k in available credit and I am fine, in fact, my low utilization (typically charge a grand or two a month) is one of the main factors keeping my score high. I can take 50k out at 0% and dump it in a high yield savings for a year and still have low utilization.

 

[OCGuy]

You will take the initial hits for the inquiry, and then the new account. Closing it right away wont do anything more.

 

[nakedfrog]

I'm on the verge of closing one or two of my oldest accounts now, because they carry a $29 and $59 annual fee, and provide no benefits of any kind. I just got my Amazon card with no annual fee and actual benefits, and the credit limit on it is well over twice the limit on those two crappy cards combined.

 

[Strk]

You'll get dinged for the inquiries and new lines of credit more than anything else.

 

[SoulAssassin]

Originally posted by: nakedfrog
I'm on the verge of closing one or two of my oldest accounts now, because they carry a $29 and $59 annual fee, and provide no benefits of any kind. I just got my Amazon card with no annual fee and actual benefits, and the credit limit on it is well over twice the limit on those two crappy cards combined.

See if they will waive the fees or convert it to a different type of account.

Originally posted by: Strk
You'll get dinged for the inquiries and new lines of credit more than anything else.

Yeah, but they bounce back in a few months. I've gone from 780->680->750 within 6 months after going on an app-o-rama.