The Hidden Danger of Removing Old Accounts
Consumers have long enjoyed the right to an accurate credit report. The Fair Credit Reporting Act, which has been around since the early 1970’s makes that very clear. One of the many rights conferred by the Act, more commonly referred to as the FCRA, is our ability to ask for the removal of accounts, both positive and negative, which we believe to be incorrect, outdated, or unverifiable. But, you’ll want to first consider the hidden danger of removing old accounts.
To be clear, “old” isn’t synonymous with incorrect. An old account can be entirely accurate but still be the subject of our efforts to cause their removal. I can remember many occasions where consumers have asked me for advice on how to have old, and many times positive, information removed from their credit reports. My answer was always, “you might end up with lower scores if you are successful.”
Don’t accidentally cause your credit reports to look younger
The FCRA does not require verifiable accounts that are in good standing to be removed, ever. It does, conversely, require that derogatory accounts be removed after seven years. Having said that, you certainly don’t want old, good accounts to be removed and you may not always want the derogatory accounts removed early either. Old accounts have immense redeeming value to your credit reports and credit scores. Asking that old accounts be removed simply because they’re old is kind of like asking for high school and college transcripts to be permanently deleted.
If you, however, choose to argue with the credit bureaus about getting old accounts removed, you might be successful. And, if you are successful, you’re going to regret it. Old accounts are very valuable to your credit scores, even if they may include negative information like late payments.
There is a metric in the FICO and VantageScore credit scoring models called “Time in file.” Time in file is industry speak for the age-related metrics in credit scoring systems. Specifically, there are two metrics you want to be concerned about. One that considers the average age of your accounts and the one that sets the age of your credit reports.
These metrics are worth about 15% of the points in your credit scores. To put that in perspective, that’s 150% the value of credit inquiries and you know how people love to obsess about inquiries. Point being, if you want elite level credit scores you must do well in the age category. And yes, even old derogatory accounts are included in these age-related metrics, not just to positive accounts.
Generally speaking, the older your credit reports are, the better. If you have a bunch of old accounts, then you’re going to have an old average age of “trade.” And, if you have really old accounts then you’re going to have an old “oldest account” on your credit report.
Note: None of these age metrics have anything to do with your actual date of birth or age. This is all about the age of your accounts.
How credit scoring systems measure credit report age
If you take the Date Opened from each of your accounts (not collections or public records) you can determine how old the accounts are. Then all you need to do is add them together and divide it by the number of accounts, thus yielding your accounts’ average age.
The oldest account is determined exactly how you would assume it’s determined. The credit scoring models will look, again, at the Date Opened of your accounts and use the oldest one to determine the metaphorical date of birth of your credit report.
You want both metrics to be as old as possible, over 20 years optimally. Then, and only then, will you be able to bank all the points in that “15%” category that’s keeping you from repeatedly nailing scores at or above 800. If you are successful at causing the removal of old accounts you’re going to cause your average to be younger. This will likely cause your scores to go down, even if the account removed contains negative information.
