Why is my credit score so high?

September 12, 2006 9:54 AM

Why is my credit score so high?

Back in Freshman year in college, I naively signed up for 6-8 credit cards in a promotion to get a free t-shirt with a passed out Curious George on front. I subsequently cut up the cards they sent me and ignored the accounts. It wasn't until two years ago (5 years past) that I learned about credit reports and freaked out when I saw how many open unused accounts I actually had. I closed nearly all of them. Now I've just checked my report for this year and my score is surprisingly excellent. Does my credit score not depend on the fact that all my former accounts had a $0 high balance? Aside from those, I only have one legitimate credit card, a few store credit cards, and a student loan. Also, should I try to have those unused and closed accounts removed from my credit report as they don't actually reflect anything? I hesitate to do this as I wouldn't want my credit to go down.

posted by pinksoftsoap to work & money (12 comments total)

Uh...the main reason your credit score is so good is because, unlike most Americans, you don't owe a shitload of money to a shitload of companies, you haven't written a shitload of bad checks, and you haven't been called on by a shitload of collection agencies.
posted by bingo at 9:57 AM on September 12, 2006

Actually, I'd change "unlike most Americans" to "unlike *some* Americans" in bingo's extremely on-the-mark comment above.

The majority of Americans don't have deliquent accounts, which is why it takes more than being an on the time guy to get the best credit.

You need to have low or zero balances, like the poster, or a minimum of revolving lines of credit, etc.

Stay on time, and try to restrict borrowing to mortgages and student loans. That seems to be the key to good credit scores.
posted by Gordion Knott at 10:02 AM on September 12, 2006

While having too many open accounts can negatively affect your score, it does not affect your score in the long term, like delinquencies or bankruptcy.

In other words, if I open ten accounts today, my credit score will go down. If I close them tomorrow, my credit score goes back up immediately.

However, if I am late paying my credit card bill for three months, my credit score will go down, and I will not get those points back for some time, I'm not sure how long.

Other things like charge-offs and bankruptcies stay on your record for seven and ten years.
posted by poppo at 10:03 AM on September 12, 2006

I guess my question should have included: "Was it due to my opening up so many accounts years ago that caused my credit score to be surprisingly high or did they not affect it at all?"
posted by pinksoftsoap at 10:11 AM on September 12, 2006

That's a common impression of the debt loads that the average American carries and it's just not true.

MyFICO shows how the score is determined right on the front page. You have a good combination of payment history (since an account that you never charged anything on shows Paid On Time month after month), good length of credit (assuming you didn't cancel ALL the accounts you've had for that good long time) and good utilization (under 30% of your total credit lines).

You could have a BETTER score if you were in the 10-20% utilization range (which you might, considering your student loans) but you probably shouldn't mess with it. A closed account with a positive payment history should be left alone. It's possible to micro-manage your score but if you don't have an imminent home purchase coming up you should probably leave it be until such time as you have a reason to get something removed.
posted by phearlez at 10:14 AM on September 12, 2006

I guess my question should have included: "Was it due to my opening up so many accounts years ago that caused my credit score to be surprisingly high or did they not affect it at all?

The length of your credit history can affect your score (paying your bills for 5 years says a lot more than about your creditworthiness than paying them on time for 1 month), but it was my impression that inactive accounts (e.g., credit cards that you never used but kept open), after a certain amount of time, affect your score neither positively nor negatively. So your credit score is most likely high because you have some debt (student loan and some credit cards you do use) and you pay it off in a timely fashion.

Standard advice seems to be to never close credit cards because of the effect of your average account age on your score, but as I said, since you never used those cards, closing them probably didn't affect you either way. Opening them probably caused your score to dip at the time, but surely that effect is long gone. And I'm not sure you can get them removed from your credit report, even if you tried. My understanding is that items are only removed when they don't belong there--and it seems that these accounts do belong there, as you signed up for them.

Discussions of "why is my credit score like this?" tend to be fraught with speculation, as the algorithms used to compute credit scores are proprietary.
posted by epugachev at 10:32 AM on September 12, 2006

There's generally no reason to remove old closed positive tradelines from your credit report, as, they can still provide age. I don't believe removing them will help your score at all.
posted by yeoz at 11:14 AM on September 12, 2006

In other words, if I open ten accounts today, my credit score will go down. If I close them tomorrow, my credit score goes back up immediately

That is actually not true. Having a long credit history is actually desirable. So closing credit cards rather than keeping them open with a low balance, results in lowerig your score. Someone with a long credit history and many credit cards has a better score than someone who never had or doesn't have any credit cards.
posted by scazza at 1:58 PM on September 12, 2006

Which credit reporting agency did you use? I recently requested mine through Transunion and was shocked at how hight my score was -- until I realized it was out of 950, for some reason. Normally they're out of 850.
posted by croutonsupafreak at 5:58 PM on September 12, 2006

That is actually not true.

And the other factor that comes into play here is the number of recent inquiries into your credit, or "hard pulls." When you apply for a credit card you authorize them to look at your credit report. This authorization gets noted on your credit report in such a way that other companies can see it, and generally knocks down your score a bit if you apply for a bunch of cards at the same time. The theory is that if you are applying for a lot of credit in a short period of time, you are potentially desperate and thus potentially less creditworthy. I think it takes something like 6 months before the effects of hard pulls go away.
posted by epugachev at 1:34 AM on September 13, 2006

Yes, my scenario was meant to be taken out of context of all the other factors which affect credit, demonstrating only that opening and closing a large amount of accounts, by itself, is only a short term affect on credit score, not long term.
posted by poppo at 8:28 AM on September 14, 2006

As others have said, it's usually a good idea to leave old accounts alone, because they both provide age and decreate your % utilization. Having the same address for over a year helps, too. IIRC, hard pulls stay on your account for 2 years. There's a lot of good information (though slightly of the obsessive micromanaging variety) at FatWallet Finance.
posted by Mr. Gunn at 1:13 PM on September 14, 2006