length of credit history and s

Discussion in 'Credit Talk' started by dave, Nov 19, 2000.

  1. dave

    dave Well-Known Member

    I'm a little confused by the earlier discussion about longer credit history improving scores along with the idea that it is a bad to close your oldest account. Length of credit history and length of a particular account are different. My oldest line was Cap.1 until I closed it a few months ago. I got the card in '94. Even though closed, it will be reported until 2007 as an account opened in '94 that I had for six years. So, I have these questions:

    1. Assuming that closing the account has no effect on the debt utilization ratio, would the score go down simply because my active accounts are more recently established than this one?

    2. Why would anybody think that closing an account increases credit risk when it should signal the opposite conclusion, namely that the consumer is not credit hungry?

    2. Isn't it possible that keeping the card might actually reduce the credit score because it is another open trade line that is just enough to be too many?
  2. Alwilda Sm

    Alwilda Sm Guest

    RE: length of credit history a

    One of my reports says that derog info stays for 7 years, and positive only for 10. I'm pretty sure that this would be timed from the date-of-last-activity.

    -Alwilda Smith
  3. Momof3

    Momof3 Well-Known Member

    RE: length of credit history a

    You have some great questions, I hope someone can jump in here. I have been wondering too about this whole history. I guess the key word may be "active",what I mean is does your oldest tradeline HAVE to be active to be factored in? We all know length of history is 35% of your scores, which is the biggest factor. Sorry I didn't help I just added more questions. And you would think closing unused or low accounts would appear to be good, but I hear if you close too many too fast that's bad, the only bad part I would see is if you highered your ratios by closing too many, but if that is not the case that would seem to show the consumer is not credit crazy.
  4. Doris K.

    Doris K. Well-Known Member

    RE: length of credit history a

    Length of credit history has little to do with keeping a particular account open for years and years. It pertains more to the length of time you've maintained a positive status on your accounts overall.

    The fact that you maintained an account with Capital One for six years is enough, providing you maintained that account without a derogatory history. A good, strong credit line is one that was well maintained for at least two years. Sometimes, one year is enough to satisfy many. Positive credit lines can remain on a credit report indefinately.

    Having too many recently-opened accounts can certainly lower your score. To many lenders, "recent" includes accounts opened within the last two years. Open accounts aged two years or more, regardless of number, are usually considered quite safe when it comes to determining credit risk.

    Your debt utilization ratio is the magic number. While the age and number of accounts have some bearing, your ratio is MUCH more important. Your total monthly debt should be no more than 50% of your reported income. The length of time you maintain such a ratio makes a big difference.

    When making a major purchase, such as a mortgage or an auto, a lender will usually make sure that your current debt combined with the debt you are about to get into will take up no more than 50% of your monthly income. Credit card debt is normally figured in by minimum monthly payments. The further you go in excess of that 50% range, the more of a credit risk you are determined to be.

    Try not to concentrate so much on FICO scores. Even though FICO tends to be god when it comes to credit, having a perfect score is next to impossible. FICO scoring is a paradox. Anything that will improve it will also hurt it. It's just like most religion. Every move you make is a sin, even when you don't even realize it. Sometimes you have to commit 10 sins to do one good deed.

    Concentrate more on maintaining that 50% debt utilization and maintaining positive credit lines for at least two years, and you should be fine.
  5. Momof3

    Momof3 Well-Known Member

    Well put

    Very well explained as always Doris:)

  6. roni

    roni Well-Known Member

    RE: length of credit history a

    Doris did an excellent job of explaining it. You must not take a post out of context. With my post I and others were responding to my particular situation. My oldest account is capital one opened 11/99. This is just one year old and to be safe it needs to be open 2 years to get full benefit from the account. My credit history started in 1989 when my first student loan hit my credit report, the day I enrolled in college. But that inactive account will not help my score. You have a 6 year capital one account which you closed. You more than received bull benefit from that tradeline. So the point is this opening an account and keeping it open for 6 months isnot gonna help your score much. Since I need to close accounts, it is just common sense to keep my oldest one opened longer or until it is 2 years mature. Two years is my goal not one year.


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