credit cards

Is credit history key to your credit score?

Leslie McFaddenQuestionDear Credit Card Adviser,
I know that about 15 percent of my credit score is determined by the length of my credit history. Is it the maximum length or some aggregate?

For example, if I have a credit card that is 15 years old and two credit cards that are 5 years old, can I close the 5-year-old cards and not affect my credit score in regards to credit history length (I know it may affect other factors in my credit score such as utilization and credit available)?
-- Derek

AnswerDear Derek,
A quick answer to your first question: all of the above.

I'm going to assume you're talking about the FICO score, the credit score most commonly used by lenders. In that scoring model, about 15 percent of a score comes from credit history length.

Elements of your credit score
MyFICO chart

This factor "considers the age of your oldest account, the age of your newest account and an average age of all your accounts," according to myFICO.com. Credit history length also includes how long it has been since you used certain accounts and how long ago specific credit accounts were opened.

I spoke with FICO spokesman Craig Watts, who tells me that even after closure, an account continues to age until it comes off the credit report. Closed accounts can sit on the credit report for up to a decade. Using your example, your 5-year old accounts would be 10 years old by the time they vanished from your credit report.

"As long as the account history is still there on your credit report you'll get credit for it on your FICO score," says Watts.

Before we plunge into minutiae, let me stress that the impact on your revolving debt-to-credit-limit ratio when you close an account is far more important and immediate than the impact on the length of credit history.

When a closed account does drop from your credit report, at that point your average age of accounts could change. Using your example, your oldest account age wouldn't change when the younger accounts come off the report. You'd then have a 25-year credit history (10 years after the two accounts were closed plus the 15 years of previous account history). Yes, your average of your accounts would then shift, but that's assuming you also didn't open any new accounts or loans in that decade following the closure of those two accounts.

I wouldn't worry so much about the eventual impact to length of credit history as long as you have older accounts on your report. As I mentioned before, the impact on your debt ratio is a more immediate concern when you close an account.

"In those cases where it changes your utilization rate, raises it significantly, then it can have a negative effect on your score," says Watts. "And that's the only reason to pause before you close an account as far as your score is concerned."

A final important point: Scores aren't ruined from a spiked utilization rate because they don't reflect a history of past balances. Reducing debt or charging less if you pay in full should boost the score.

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

Read more columns by the Credit Card Adviser. To ask a question of the Credit Card Adviser, go to the "Ask the Experts" page, and select "Credit Cards."

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