34 ms·

I have a few credit cards that I no longer use. If I cancel them my score would go down because the average age/length credit history would go down. Not by tha

I have a few credit cards that I no longer use. If I cancel them my score would go down because the average age/length credit history would go down. Not by that much, but it is surprising that leaving these cards open is incentivized whereas the more secure and less risky thing to do would be to close those accounts.

mattnewton 4y ago
It make a a bit more sense when you think about it - Risk isn’t really the main thing incentivized here, making interest payments is haha. Risky lenders don’t make payments, but neither do people who never take on debt
- medvezhenok 4y ago
  Credit scores actually are designed to measure risk, not interest payments. Otherwise high credit utilization would be a positive:) There are certainly edge cases where the score has low predictive value, but overall the correlation between credit score and risk is quite large.
medvezhenok 4y ago
The closed card drops off your account history after ~10 years, so your score shouldn't immediately go down. Technically, I'm not sure that the credit scores can differentiate between you closing a card and the bank closing your card (the latter might be some sort of signal of potential change in creditworthiness) In general, credit scores are optimized for the average consumer - and so behaviors around the edges don't always make sense in terms of your score going up or down. If you think about the system that was replaced by credit cards (i.e. keeping a tab open with many different stores), you'd be hard pressed to say that the amount of credit extended is lower now (overall), than under the old system. Whether that's a good thing or not is a different question.
- sokoloff 4y ago
  In general, your score would immediately go down as your credit utilization would go up (outstanding balance over total available credit).
  - coredog64 4y ago
    0/infinity is still zero
    - sixstringtheory 4y ago
      …depending on the languages used in their backend and the quality of their development efforts…
    - sokoloff 4y ago
      The balances are instantaneous balances, not ones that are being financed. So, if you use and pay off your card every month (as makes sense to me for points/cash back, ease of chargeback, and convenience), then your numerator won't be zero on most days. (For me, it's not $0 on any days, because of the timing of statements.)
      - medvezhenok 4y ago
        You could theoretically pay off the card before the statement posts to keep the balance at zero. Usually not worth it, but if you want to boost your credit score before getting a mortgage, that trick usually works.
  - b112 4y ago
    In Canada, Equifax et al tend to reduce score at each over 80% revolving credit account utilization.

mattnewton 4y ago

It make a a bit more sense when you think about it - Risk isn’t really the main thing incentivized here, making interest payments is haha. Risky lenders don’t make payments, but neither do people who never take on debt

medvezhenok 4y ago
Credit scores actually are designed to measure risk, not interest payments. Otherwise high credit utilization would be a positive:) There are certainly edge cases where the score has low predictive value, but overall the correlation between credit score and risk is quite large.

medvezhenok 4y ago

The closed card drops off your account history after ~10 years, so your score shouldn't immediately go down. Technically, I'm not sure that the credit scores can differentiate between you closing a card and the bank closing your card (the latter might be some sort of signal of potential change in creditworthiness) In general, credit scores are optimized for the average consumer - and so behaviors around the edges don't always make sense in terms of your score going up or down. If you think about the system that was replaced by credit cards (i.e. keeping a tab open with many different stores), you'd be hard pressed to say that the amount of credit extended is lower now (overall), than under the old system. Whether that's a good thing or not is a different question.

sokoloff 4y ago
In general, your score would immediately go down as your credit utilization would go up (outstanding balance over total available credit).
- coredog64 4y ago
  0/infinity is still zero
  - sixstringtheory 4y ago
    …depending on the languages used in their backend and the quality of their development efforts…
  - sokoloff 4y ago
    The balances are instantaneous balances, not ones that are being financed. So, if you use and pay off your card every month (as makes sense to me for points/cash back, ease of chargeback, and convenience), then your numerator won't be zero on most days. (For me, it's not $0 on any days, because of the timing of statements.)
    - medvezhenok 4y ago
      You could theoretically pay off the card before the statement posts to keep the balance at zero. Usually not worth it, but if you want to boost your credit score before getting a mortgage, that trick usually works.
- b112 4y ago
  In Canada, Equifax et al tend to reduce score at each over 80% revolving credit account utilization.