(Ben from California): Hi, I have an account that was charged-off in 1990 and that still appears in my credit report. I can easily dispute this item and remove it since it became delinquent 21 years ago. However, this account happens to be my oldest one as well. My next oldest account is from 2005, only 6 years old.
The question is this: Should I go ahead and remove this item from my credit report? Or should I keep it because it provides for a longer credit history and therefore outweighs its negative effect?
Dear Ben:
Your question tells me you have a good understanding of credit scoring. I think I can provide useful information to help you make your choice.
You are correct on your second thought. FICO-based credit scoring formulas reserve 15% of inputs for factors that relate to duration. As you have explained, removing an older account may reduce your average account history, thereby potentially causing a drop in your score.
On the other hand, FICO-based scoring models also reserve 35% of inputs for payment history. Having a charged-off account is a big negative, and it could potentially reduce your score also. I can see that you have pondered this fact as well.
You may notice that 35% is bigger than 15%, so that could be an indication that removal is best. The general wisdom for credit scoring is removal of negative credit information is usually recommended when the date of first delinquency is more than 7 1/2 years ago (typically 7 years after charge-off date).
In determining average account age, any account older than 2 years is considered a seasoned account. Having a 6 year old account is a good indication of duration, so you may still see a slight improvement with the removal of the old account. I hope this is helpful.
You can find more information from Debtors Unite about individual credit scoring factors as well as the general credit scoring components.
Thank you for your thorough response!