The most commonly used credit scoring model treats closed accounts that still appear on your credit report the same as open ones under its length of credit history factor. But no matter what score you’re checking, there are other, more important factors that affect your score.
Dear Keeping Score,I was on a site that offers credit reports and scores. And my credit age is 0. I have had my credit card for well over three years. Wells Fargo closed my credit card because I owe a lot. When I pay what I owe and I open my credit card back up, will my credit age be fixed? Or will I restart all over with no credit age? – Lexi
Credit scoring can be confusing on a good day. It is even more challenging when the terms referred to by companies are not consistent with those used by the more widely-known FICO score or VantageScore. This is the case with the term “credit age.” Neither FICO Score nor VantageScore use this term in their scoring matrix.
Credit age refers to the length of credit history, which includes the average age of your accounts. This is not to say that knowing the average age of your open accounts is not useful. It may well be for general directional purposes. It’s just not useful for scoring use.
Scores are based not just on open accounts, but your entire credit history – open and closed. For instance, FICO’s credit scoring considers closed credit card accounts – which stay on your credit report for up to 10 years – in its length of credit history scoring factor.
The deciding factor for your credit age after you pay off the balance should be whether the bank reopens your account with the same number or uses a new one. My money’s on the former. This would restart your credit age with the original three years intact.
But under FICO’s formula, your closed account should continue to be factored into your length of credit history and thus your score. You may want to check your FICO score to see how it compares with the one you’re looking at now.
The credit scoring components of FICO and VantageScore
Let’s review the components of a credit score by FICO and VantageScore. For FICO these are (in order of importance) payment history (35%), credit utilization (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
VantageScore uses the same criteria, but counts credit utilization higher than payment history and combines new credit and credit mix.
Some sites that provide financial tools rely on the VantageScore 3.0 algorithm, with six categories. Three of these are considered “high impact,” one is “medium impact” and the last two are “low impact.”
High impact categories are payment history (40%), which considers paying on time or paying late or not paying at all; credit card use (20%), which is the same as credit utilization or the amount of credit used compared to individual credit limits; and age and types of credit (21%), which includes the length of your credit history and the mix of types of credit used (mortgage, car loan, credit cards and so on).
Lower impact categories are recent credit or hard inquiries (5%) or the number of times you have applied for credit and total available credit (3%), which considers the amount of credit available on all your accounts. The medium impact category is balances (11%), the amount of recently reported current and delinquent balances.
Because your account was closed by Wells Fargo, and it was apparently the only one you had, you no longer have any open accounts. So, in spite of the fact that you had the card for three years, it is now closed and has left you without any open accounts.
If the site you’re using is looking at the average age of open accounts and you have no open account, that puts your credit age at zero. However, as you can see above, more than this one item is used to build your credit score.
Focus on paying off your closed account
I suggest you ask Wells Fargo to reinstate your old account once it has been paid down; however, the decision will be up to Wells Fargo and will be based on their current account policy. If you get an initial turn down to your request, be sure to ask to speak to a supervisor. They may have more latitude in resuscitating your account.
In the meantime, I want you to concentrate on getting the Wells Fargo account paid down. For every credit scoring scenario, paying your bills on time and as agreed is of paramount importance.
If you can manage it now, a passbook loan or a secured credit card could give you a jump-start on the age of your accounts while you are working toward paying off your debt with Wells Fargo. Both of these options will require you to use your own money as collateral, but as long as they are reported to the credit bureaus they will help your cause.
I like a passbook loan (sometimes called a first step loan) for helping with credit mix, but the choice is yours. Just be sure to ask if they report to the credit bureaus before you sign up for anything.
Remember to keep track of your score!