Time Length of Accounts & Personal Credit

Created on 12/20/2016 by Thomas (TJ) Underwood of Realty 1 Strategic Advisors

Learn why you must keep older accounts in good standing open and active while maintaining and improving your credit…

Did you know that "how long" you keep accounts in good standing on your credit report is a key factor in maintaining and improving your credit? 

It is important that you keep aged accounts open if you are in the process of maintaining or improving your credit.

In this discussion of the 5 factors that affect your credit we will focus on and discuss the importance of "time length of your accounts" (keeping your older accounts open and active).

You already know that payment history is very important, but did you know that the time length of your positive payment history is also very important to creditors and those at the credit bureaus (and FICO) who access your credit file for credit scoring?

When a creditor rubs you the wrong way it can be tempting to react negatively and close the account. 

But is that really the best decision that you should make in a time of stress. 

If you are in the process of maintaining or improving your credit in an attempt to reach certain goals that you may have—closing your account may be a bad option for you and your family.

Those in the credit industry who monitor credit files and subsequently create your credit score or scores have a 24 month look back, generally speaking. 

However, they also weight positive credit that possibly goes back further (15% of your credit score) and you should leave accounts open that have a positive payment history. 

If your account that has a positive payment history is closed—the account will still be weighted—but not as high as if the account remained open. 

Over time, the closed account and the weight applied will go down. 

Therefore, depending on your goals you may want to keep accounts with a positive standing open and active by using the available credit sparingly and paying off the outstanding balance in as timely a manner as possible.

Again, you must be cognizant of the 5 factors that affect your credit score which include:

Negative Information (you must do all that you can to keep it off of your credit report—you tell me all about "Payment History and the importance of keeping Negative Info out of your credit file" after reading this article—LOL—no seriously)  also known as your Payment History— comprises 35% or is

1st in importance of the credit factors

Utilization or how you Use Your Credit (do your best to keep your account balances low or at zero)—30% or

2nd in importance of the credit factors

Time Factor or how long you Keep Your Accounts Open (be sure to keep older accounts with a positive payment history open—you tell me all about "how important the age of accounts are"—LOL—no seriously)—15% or

3rd in importance of the credit factors

Type of Credit or your Credit Mix—which we discussed in a previous article (you tell me all about "the types of credit"—LOL—no seriously)—10% or

4th in importance of the credit factors

Inquiries or how many creditors do a Hard Pull of your credit file (keep your hard inquiries to a minimum if you are trying to improve your credit in a timely manner)—also 10% or

The same level of importance as the type of credit mentioned above

100%—get the picture…

By knowing how negative information, utilization, time length of accounts (that we are now discussing), type of credit and inquiries interact in your overall credit picture you can make the right moves that will take you toward your goals in a more efficient and effective manner!

Conclusion

Your clear understanding of why you must keep older accounts open (time length) is critical if you desire to build your credit in a timely manner.

You cannot act hastily and close accounts or randomly close accounts due to not knowing the effect, if you desire to build your credit in an efficient manner.  

Likewise, opening a number of accounts (or even just one) in a short period of time will shorten the time length of your credit file and also pull your score down.

By closing your account and/or applying for new credit you also affect the "age or time length" of your accounts and that too will pull your score down.

By fully understanding "how the time length of your accounts affect your credit" you can put yourself on a path to achieving your goals and living the life that you desire in a manner where you can achieve your goals more efficiently while at the same time living your life in a more enjoyable manner!

You are now in position to make improvements in your credit happen in real time.

All the best...

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