tzoom84

I noticed I was starting to diverge from the topic on the AA 75,000 thread with some credit based questions.

I'm trying to get to the bottom of the concept of either closing mileage cards that have "bonus'ed", or keep them open. Note I'm more interested in the age factor than utilization, because I have near zero utilization.

For age, credit scores are affected by: (1) Total age, and (2) average age of all accounts. Let's ignore (1) for now because that one is easy, just don't close your oldest card.

Now searching the web, I am finding conflicting details about exactly what "average age means".

• Is it average age of ALL accounts, revolving and other types?
• Is it average across open AND closed?
• Is it open accounts ONLY?
• When one closes an account, after say 3 months, is the average age for that account still included? If so, is it from open date to current date, or open date to close date?

Perhaps my googling was poor, but I found it difficult to get a clear answer off Mr. Internet.

I have two trains of thought
(A) Cancel after getting the miles(B) Keep all cards open until the annual fee is due, and when they are due, work to get retention perks.So tying this into what so many do here, what do YOU do after getting the bonus miles, and what's your reasoning? And does anyone have a clear understanding of the definition of "average age"?

Some references on "average age" definition:
Fico Forums Discussion Thread
Credit.com Article

Mabuk dan gila

I have researched closing cards in depth and have some considerable experience in closing cards in the last couple of years since in 2009 almost all the banks I had cards with went completely nuts and every time I opened my mail box there was some kind of letter saying they were taking some kind of adverse action against me in reward for many years of perfect account history.

There are two main issues in closing cards. Average account age and utilization.

Closed accounts DO apparently still count towards average account age up until they drop off in 10 years. This means there will be no immediate impact at all on average account age. Only in 10 years when it falls off will you take a hit on average account age and by that time any effect should presumably be muted by age on additional accounts acquired in the mean time or other existing accounts which you have maintained open. Opening new accounts may have a big impact on average account age. Especially for people with a short credit history. But closing accounts has little impact.

On the issue of utilization. IF the creditor is reporting the credit limit, it is lowering your utilization by showing you have more available credit in relation to any outstanding balances. If you close these cards it will immediately raise your utilization and if you have high outstanding revolving debt in relation to your remaining credit limits it could have a profound impact on your credit score. However if you have plenty of other cards with good credit limits and low outstanding revolving debt it will probably have no impact. Furthermore, most "World" cards, "Signature" cards, and Amex cards do not report the credit limit at all and therefore do not impact your utilization either positively or negatively so for those cards it is usually a non-issue.

In my case, in the last year or two I have closed about 8 cards. Many with 10 plus year histories. I also opened about 6 new cards. It knocked my FICO score from ~760 down to ~720. I believe the point loss was almost entirely due to the increase in my utilization because many of the cards I closed had very high limits and I do have significant outstanding debt. I was closely monitoring my FICO score and when a card with a high limit reported as closed it always resulted in an immediate drop in my credit score. However when my "World" cards and "Signature" cards reported as closed there was zero impact on my credit score.

In summation, it depends on the person. People with solid long established credit histories and low revolving debt will have little if any impact from closing cards. People with short credit histories or high outstanding debt may see a much greater impact. Closing "World", "Signature" or Amex cards that do not report the credit limit should have little impact on almost anyone.

tzoom84

Wow excellent info Mabuk dan gila! Thank you for sharing your research and personal experience!

Since I am in the group of mid-20s with short credit history (~6 years on oldest card), I'll definitely try to play a bit safe. I've had many inquiries while shopping for balance transfer cards and also mortgages in the past 2 years, so I'm going to only do minimal card openings until many of those clear off over the next year. Based on your research, this should also be good for me to ensure my average age doesn't drop too low with too many cards opened in one year.

And based on your info, it sounds like assuming one doesn't have ANY outstanding revolving debt, there's NO damage in closing credit cards, since they still count towards age?

techboyds

The flip side of this, of course, is that the card drops off the report at just the time it will really help your average age of accounts.

Unless there's an annual fee, why close the card? What damage there is has already been done, and won't be undone by closing.

If there is an annual fee, of course, then it probably makes sense to close it before that hits.

tzoom84

agreed