Older unused credit accounts fade in influence, leaving your active credit accounts as the primary indicator of your creditworthiness. As such, it is important to make sure that you maintain multiple active credit accounts if you want to be rewarded with higher credit scores.
| “Number of Established Accounts” | Credit Score Risk Factor Codes |
| Equifax | 31 |
| Experian | 31 |
| TransUnion | Not Factored |
| NextGen | R2 |
An open account in good standing does still factor positively into your credit score. The longer it has been since your last activity on the account, the less the account will help you.
That means that it is very important that you still have other active accounts that report to the credit bureaus. At least one actively used credit account may be enough to prevent seeing this reason code on your credit reports. However, since Fair Isaac and the credit bureaus do not provide exact feedback on this code, you may wish to consider having more than one active account at any given time.
Ideally, having at least one major credit card with recent activity and at least one installment loan also with recent activity should help you gain more credit points. While “recent” is not defined, you can reasonably assume that activity within up to 6 months would constitute recent activity. Anything occurring more than 6 months ago likely falls outside of the scope of recent activity.
If you have a major credit card account, you should consider using the account every few months in order to maintain active records. This assumes that you pay the account off in full and do not carry a balance over to another month. If the card has a balance, you should avoid adding additional charges until after you are able to fully repay the balance.
Installment loans should be paid according to schedule. Feel free to overpay from time to time as long as you have no prepayment penalties. Once an installment loan has been repaid, you do not necessarily need to go out and get a new loan. You may be slightly penalized for having no recent non-mortgage balance information, which could pertain to other installment loans or revolving accounts alike.
Revolving credit accounts are expected to be used regularly, and an additional penalty for having no recent revolving balances can also apply. There is however no rush to open a new installment loan once you have made your last payment. Installment loans do not fade as fast as revolving accounts do.
As long as you utilize your major revolving accounts every several months, you can avoid seeing this code on your credit report. While this may not be one of the biggest factors in credit scoring, it can keep you from reaching higher credit scores that may be required to obtain the best interest rates.
Note: Too few accounts with recent payment information is credit bureau risk score reason 31 with Equifax and Experian. Code R2 applies for NextGen scoring products.
Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.
Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.
In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.
Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!
Favorite quote:
"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
Thomas Jefferson
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