Why closing an account could damage your credit report score

The average length of your credit history accounts for about 15% of your weighted credit report score calculation. For example, if you have a combination of three revolving accounts and credit cards that have been open for 2, 3, and 7 years then the age of your oldest open account is 7 years. The average age of your open accounts is 4 years. Both numbers are used in the credit score calculation.

Closing the oldest account in this case would likely drop your credit report score by 20 points or more. Closing an old account could also affect your credit utilization percentage causing a double whammy hit on your credit report score. By the same token opening a raft of new credit cards or revolving credit accounts would have a similar affect.

People who have always paid their bills on time and have closed old, unused accounts are shocked to find out that doing what is intuitively the right thing has dropped their credit report score and forced them into paying higher interest rates or higher insurance premiums.

Closing an account with a late payment history after you’ve paid it off doesn’t get rid of the damage to your credit report score any faster than leaving it open. The only way to really fix your credit report score in these situations is to clean that closed late payment account off your credit report.

How shopping for a loan or a better credit card rate can damage your credit report score…

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This entry was posted on Thursday, April 9th, 2009 and is filed under Fix My Credit. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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2 Responses to “Why closing an account could damage your credit report score”

  1. Time the amount of your debts to improve your credit report score on April 9th, 2009 at 4:25 pm

    [...] Why closing an account could damage your credit report score… Category: Fix My Credit Social Bookmarks: – (what´s this?) – spread the word! (more bookmarking services) [...]

  2. Time your debts to improve your credit report score | How Can I Fix My Credit? on April 29th, 2009 at 3:44 pm

    [...] Why closing an account could damage your credit report score… Related Posts:Why closing an account could damage your credit report scoreHow much you owe affects your credit report scoreHow opening an account can improve your credit report scoreCredit repair is how you can influence the things you do not controlThe scores that matter post-grad Category: Fix My Credit Tags: credit utilization Social Bookmarks: – (what´s this?) – spread the word! (more bookmarking services) [...]

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