In credit repair, the age-old battle between experience and newness often tips for the veteran, especially when managing your credit report. This installment of our Credit Coach series, titled “The Old Timer vs. the Rookie,” delves into why keeping older credit accounts active can be a game-changer in boosting your credit score.
If you’re pondering whether to keep old credit card accounts or other forms of revolving credit, the answer is a resounding yes. Unlike other scenarios where the rookie might have the upper hand, in the world of credit scores, the veterans hold the fort. Older accounts contribute to a lengthier credit history, which is a pivotal factor in credit scoring models. Closing these accounts might lead to them dropping off your report prematurely, thus shortening your credit history and potentially lowering your score.
It’s not just about how old your accounts are; how you use them also plays a crucial role. Leveraging more than 50% of your available credit on any revolving account can be detrimental to your credit score. This is because credit scoring models, like those created by FICO, assess your credit utilization both per account and across all accounts. Keeping your utilization low helps maintain your score but also assists in managing your debt ratios more effectively.
A common misconception is that having too much available credit can harm your score. However, this isn’t necessarily true. The total amount of available credit is just one piece of the puzzle and not a decisive factor on its own. Therefore, it’s advisable to keep those unused credit lines open. If you find yourself needing to close some accounts, opt for the newer ones or those with lower limits rather than your oldest ones.
What should you do with an old account that you haven’t used in a while? A simple, effective strategy is to make small, manageable purchases. This could be anything from a tank of gas to a meal out. Small charges not only keep the account active but also ensure it’s something you can pay off quickly, avoiding high utilization and interest charges.
In the intricate game of credit scores, wisdom comes with age—at least regarding your credit accounts. Embrace the strength of your long-standing credit history by keeping those old accounts open and lightly active. They’re not just numbers; they’re your allies in building and maintaining strong credit.
Actionable Steps Forward
Remember, every swipe or payment is a move on your credit score chessboard. Make thoughtful decisions about which accounts to close and which to cherish like seasoned warriors of your financial arsenal. Whether buying a birthday gift or just refueling your car, these small actions keep your credit history robust and your scores high. Keep the old timers in your lineup to ensure your credit remains in top shape, paving the way for financial opportunities. Stick with the strategies outlined in our Credit Coach playbook, and watch your credit score thrive under the guidance of time-tested wisdom.