When you maintain a credit card for over 10 years, there are no automatic rewards or changes in your account status, apart from the regular annual fee, if applicable, being charged on your account’s anniversary. Occasionally, your credit card issuer might send a token of appreciation, like a thank-you note, but that’s typically the extent of recognition for your long-term commitment. Understanding the nuances of credit card longevity can help you leverage these accounts for better financial health.
Reaching the 10-year mark with your oldest credit card can be a strategic goal, particularly if you’re aiming to enhance your credit score. Data from FICO indicates that consumers boasting a FICO® Score exceeding 800 typically opened their revolving credit accounts around 140 months ago, which is just shy of 12 years. Even among the youngest 15% within this elite credit score group, the average age of their revolving credit accounts is approximately 105 months or nearly nine years. This underscores the importance of long-standing credit relationships.
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How Keeping Your Credit Cards Open Boosts Your Creditworthiness
Consumers with high credit scores often maintain long-standing credit card accounts for a variety of reasons. Contrary to a common myth, age does not influence credit scores; in fact, the age of the individual is not a factor considered when calculating a credit score. Instead, the focus is on credit management and history, which plays a crucial role in determining financial reliability.
The primary factor at play is the “length of credit history,” which constitutes 15% of your FICO® Score. This encompasses various time-related metrics, including the average age of all your credit accounts and the age of your oldest open account. By keeping the same credit accounts active for several years, you can significantly enhance your credit score. Long-term credit relationships demonstrate stability to lenders, which can be beneficial for future borrowing.
However, it’s vital to combine longevity with responsible credit behavior to truly maximize your credit score. Payment history is the most significant category, making up 35% of your score, and adverse events can quickly overshadow the benefits of a lengthy credit history. Notably, 95% of individuals with scores over 800 have never faced a delinquency, highlighting the importance of maintaining a clean payment record. Therefore, a well-established credit account paired with consistent, responsible usage can greatly elevate your creditworthiness.
Moreover, the second most impactful element of your credit score is the amounts you owe, accounting for 30% of your overall score. By keeping your credit card accounts open for extended periods, you can indirectly influence this aspect. Maintaining older accounts allows you to manage your credit utilization ratio more effectively, which is critical for a strong score.
To illustrate this concept, consider a scenario where your total credit limits amount to $10,000, and you owe $1,000. In this case, your credit utilization is 10%. However, if you were to close an old, unused credit card with a limit of $2,500, your utilization spikes to over 13%. By keeping older accounts active, even if they are not used frequently, you help maintain a lower credit utilization rate, which is advantageous for your credit score.
Assessing When to Keep or Close Your Credit Cards
While it can be beneficial to keep credit cards open for a decade or more, it’s not advisable to retain every single credit card indefinitely. If a credit card account remains unused for an extended period, it is common for the issuing bank to close it due to inactivity—this has occurred to me personally on two occasions within the last year. Therefore, if your goal is to maintain an old credit card, make sure to use it periodically to keep it active.
Moreover, there are valid reasons for closing certain credit cards, despite the potential for a minor decrease in your credit score. For instance, if you’re incurring an annual fee on a travel credit card but not fully utilizing its benefits, it may be wise to consider canceling that card. Weighing the cost against the value received can lead to smarter financial decisions.
Ultimately, while striving to enhance your credit score is essential, it should not be the sole consideration when deciding whether to keep a credit card open. Evaluating your overall financial goals and the specific benefits of each card will provide a clearer path forward.
