FICO Scoring System 3 – Credit History

Closing Accounts

How long you have had credit accounts for 15% of your FICO scores. It is good to have a long history of credit. Your initial reaction to start credit repair may be to close old accounts, especially if you are in bad standing with them, but you may find that closing old accounts could actually cause your scores to drop. If the accounts you are closing are a big percentage of your overall credit limit, the scores may drop dramatically. If, however, you close an account that is only a small fraction of your credit limit, your scores will likely drop only slightly.

Opening Accounts

Opening a new account tells lenders that you need more credit to pay off your bills, so your credit scores will initially drop. The good news is, however, this drop in scores is not permanent. Once you show creditors that you are capable of handling your new accounts, your FICO scores will slowly start to improve. It will probably take around three to four months for this improvement to take place. If you are on a time crunch to better your credit scores, we recommend holding off on opening any new accounts. If time is on your side, having more open credit in good standing will increase your credit scores.

In With the Old

Although having much credit is good, having more than five revolving accounts creates no benefit toward your credit scores. When thinking of closing an account, remember that an account with a longer history will look better on your credit report. You will need to weigh the pros and cons when closing an account because it would not look good to keep your oldest and worst account open just because it is the oldest. If you put some thought into which account to close, you may be able to do so without affecting your credit scores.