Here’s the skinny on your credit history: At 15% of your credit score, it’s certainly worth paying some attention to, but there’s only so much you can do besides pay your accounts on time, and wait.
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First, Do No Harm
DO NOT, DO NOT, DO NOT close old accounts! It may seem counter-intuitive, but it will only cut off valuable history, and reduce your score.
It seems exactly opposite of what you’d think your credit score model would want you to do, but closing accounts hurts you in many ways, but especially in the 15% that is your credit history. When you close your credit card or line of credit, all the credit history you built up in that account is gone. You’re now starting at zero.
Another aspect of closing an account, is it reduces the amount of credit available to you which can hurt your debt-to-credit ratio, the 2nd-largest portion of your credit score.
Check out our credit improvement timeline to see how people get to 800+ credit. It takes a long time – many, many years of having the same credit accounts, and never being late on their payments.
When it’s okay to close an account.
The only time to close an account is when the cons outweigh the benefits.
Many people feel a great sense of relief when they pay off an account. It can feel like the natural thing to do: Close the account when you get done paying off the debt. BUT it will harm your credit score by cutting off the hard-earned history that you’ve built up with the account.
When the fees are just too high
Some accounts like credit cards and signature loans have high annual fees and are just not keeping around. If you’ve had a revolving account for less than a couple years, you might not have built up enough history to keep the card around. But remember, every card and account in your arsenal should have a reason.
Check out our credit improvement timeline to see how people get to 800+ credit. It takes a long time – many, many years of having the same credit accounts, and never being late on their payments.
When you have a serious spending problem
Credit cards are designed to make it easy to spend, but most people, when they finally are educated on how credit works, can curb their spending habits enough to pay down their debt and get their credit back in order.
But if your are a “credit addict” – someone who is psychologically addicted to spending – then cutting off access to accounts any way possible might be the best for you. If you are putting your family in jeopardy with your spending habits, then you may need to contact a debtors anonymous.
“Piggybacking”
Simply put, piggybacking is the practice of “co-signing” one consumer onto another consumer’s revolving credit account.
Does it still work?
A couple years ago, FICO rolled out a new scoring system called “FICO ’08″ that was supposed to eliminate piggybacking practices. But FICO ’08 didn’t catch on. The industry kept using the same old FICO model as the basis for mortgage credit scoring. So, the quick answer is, yes. Piggybacking is still a viable way to extend a person’s Length of Credit History.
How much of a risk is piggybacking?
Both particpants in a piggybacking relationship are taking a risk beacuse of the possibility of the other person not paying, and the account going deliquent, or the account getting maxed out by either party (since both have access to its funds). This would affect both credit reports associated with the account. Make sure both parties know exactly the details of the agreement of the account, and how to come off the account, if the need should ever arise.
Does piggybacking harm your credit report?
Not at all. It’s simply a co-signer agreement, and there’s nothing that the bureau can put on your report that “flags” a potential creditor. It certainly cannot hurt your credit score, unless the account goes unpaid, or gets maxed out.
Can you hire someone to find a piggyback account?
There have been some companies in the past that “connected” piggybacking partners for a fee. Archer Credit does not recommend using these companies, since they mostly seem like they’re part of the seedy underbelly of the credit repair world. For legit credit restoration services, please check out Archer Credit’s recommended credit repair companies.
How can I piggyback with someone?
The best way to find someone to piggyback with, is to ask your friends and relatives to allow you to join them on one of their older revolving accounts (credit cards, lines of credit). You must have a very trusting friend or family member to allow you access to their account, and their good credit history. Make sure you do everything you can to keep your finances under control so you can make sure you’re current on all your bills.
