Old Cancelled Cards

Question

I was living abroad during the credit crisis, and a few of my credit cards were cancelled for non-use during the crunch to tighten credit. As a result, I have one older account and several newer accounts. Are those older closed accounts still contributing to the average age of my accounts, or did the cancellations screw me? Once seven years have passed since their closure (next year), will these old accounts drop off my report? If so, will my average account age change (decrease)?

Also, because of the monkey business above, my oldest account is now my oldest account by FAR. There is a six-year gap between this account (the only one that wasn't cancelled while I was abroad) and my next oldest card. I am only 28, so that's a significant percentage of my credit history, which started when I was 18. Unfortunately, my parents have terrible credit and can't add me to their accounts to artificially lengthen my credit history, like so many others do. This old account has an annual fee, and it's one of those terrible college cards with a usurious interest rate. If the answer to my question above is that the closed accounts are not helping my average account age, is it worth keeping this one account open and just eating that fee, or am I overestimating its value? For whatever it's worth, I probably have about ten open revolving accounts (six closed), three open student loans (ten closed), one car loan (soon to be closed), and one mortgage (opened this year). Does the number of open accounts mean that this old account is helping my score less than I am imagining it might?

How heavily do credit scores weigh average account age as opposed to things like credit mix (which would improve if I closed some credit card accounts, including the usurious one), etc.?

Answer 1

FICO 08, a newer fico formula that many lenders are simultaneously switching to now, ignores artificially lengthened credit history/score by piggybacking. So don't feel left out in that regard.

Average age of accounts is affected when closed accounts fall off your credit report, which can take 7 years, not just by closing them. But I'm not familiar with the latest "weightings" of these things, so its tough to say how significant it will be when that happens. There are also newer FICO formulas, that may become relevant 7 years from now, so it is definitely something to be conscious of but they aren't immediately consequential, since you can do other things to improve your credit worthiness in the near term.

Answer 2

Closed accounts are used when calculating Average Age of Accounts (AAoA) by FICO. They will drop off your report 7 years after their closure, at which time your AAoA will decrease and most likely lower your credit score.

Keeping your oldest card with an annual fee (AF) is a tough question. Since the exact calculations are a secret, it's hard to quantify the value of that card. Keep in mind that if you do decide to close it now (or right before the next AF) it will continue to count for the next 7 years.

What you can do is the following: Assume you won't be applying for any new cards in the next 7 years. Look at all your current accounts and calculate the AAoA of all of them that would still be on your report 7 years from now. Calculate it with and without your oldest card. The difference will show you the effect closing the card today will have.

There is a potential way to raise your AAoA depending on if you have an AMEX card. AMEX reports all accounts as being open from your original 'member since' date. If your oldest AMEX (ever, not necessarily still open) is older than your AAoA, opening a new AMEX will actually raise your average.

age of accounts is 15% of your score.

note that some websites that calculate your AAoA for you (like creditkarma) don't count closed accounts, but since FICO does the age those websites generate should be ignored.