Utilize the length of credit in the calculation
Remember that after seven years you can remove delinquent or negative credit information. So, why would you want to keep old credit accounts open, if you don’t see a use for them anymore? As we have been going through actionable strategies to build great credit and increase your credit scores, the FICO calculation has been consistently mentioned.
You know that payment history is weighted the most, with the amount owed weighted at 30% of the overall calculation. The length of time you have had a credit account may only impact your score between 10 and 15 percent, but that is still a factor in the overall calculation.
New accounts are also part of the overall calculation. When they happen frequently, they can hinder your credit as opposed to helping it. For instance, if you needed a new utility account three times in the same year that is going to hurt your credit versus having the same utility company for 30 years. The person switching utility companies three times in the same year is seen as unstable. There must be a reason for them to be moving around. There may be a legitimate reason, but typically moving around a lot is a sign of not being able to afford where you currently live in as opposed to something like finding a new job, buying a new house, etc.
Even if you are not going to use certain accounts with a high frequency, you still want to keep them open. Installment agreements will end, and open accounts like utilities will be closed when you move. So, this strategy is best for checking, savings, retirement accounts, and credit cards.
Although opening and closing a savings or checking account does not have a significant effect on your credit score, any violations of the bank’s account agreement could show up on a consumer report known as the ChexSystems report. The ChexSystems report records any violations from bank accounts, not credit accounts.
Repeated opening and closing of accounts to take advantage of sign-up offers may be recorded on your ChexSystems report. Excessive withdrawals from savings and money market accounts, unpaid overdraft fees and negative account balances are other examples of other violations that can be recorded. The bank can reject your checking or saving account application if you have many violations.
How it Works
- Do not close old credit card accounts.
- Use the card one a month.
- Pay off the amount you have put on the card.
- By paying off the card each month, you are not going to pay interest.
This strategy is fairly simple. You do not want to close old credit card accounts. From time to time, such as one time each month, you need to use the card, and then pay it off.
- You are not going to pay interest as long as he balance is paid in full.
- Make sure to use the card for at least one transaction in the month, but a transaction you know you can pay off.