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riverdog7

Which is it: "Average Age of Accounts" or "Average Age of OPEN Accounts"

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Hi everyone:

 

I wanted to make sure I understand this one area. Which of the following is a factor in your credit score:

 

Average Age of (all) Accounts

or

Average Age of OPEN Accounts

or

Both?

 

The reason I am asking is that I'm thinking of closing two new accounts I opened recently because I don't need the utilization. (the accounts are JBR and Jareds). Closing these two will add about a year to the average age of my OPEN accounts.

 

Obviously I'll keep them open if my credit score is mostly concerned with the average age of ALL of my accounts. Can someone explain this further for me? Thanks.

:glare:

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Average age of accounts both open and closed.

 

Just keep them open , let them age that wont help you.

Edited by Unas2k5

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Average age of accounts both open and closed.

 

Just keep them open , let them age that wont help you.

Thanks for your response. Here's why I was asking:

(from Credit Karma)

Average Age of Open Credit Lines

 

Credit history is a significant component of your credit score. As such, the average age of your credit lines can be a strong indication of your credit history. Care should be used in keeping old accounts open, active, and in good standing.

 

It seems to give the impression that OPEN credit lines is what they average. As does the following from Frugal Dad .com:

 

The length of time your accounts have been opened ranks third highest in the various factors used to determine your FICO score. Closing an old credit card account effectively reduces the average age of your credit history and can reduce your credit score accordingly. However, closing new accounts can have the opposite effect.

Edited by riverdog7

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Having open credit lines with age is a good thing. Closing those new TL's will do nothing for you but increase utilization. AAOA is calculated using both open and closed accounts.

 

 

Someone clear this up?

Edited by Unas2k5

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Having open credit lines with age is a good thing. Closing those new TL's will do nothing for you but increase utilization. AAOA is calculated using both open and closed accounts.

 

 

Someone clear this up?

 

 

Thats correct. With respect to FICO.

 

Don't need to worry how CS, CCT, MCK etc look at it.

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So.. for us shortbus people.

 

 

4 accounts.

2 open for 2 years

2 open for 1 year

 

Avg. Age - 1.5 years (2+2+1+1)/4=1.5

 

 

4 accounts

2 open for 2 years

2 open for 1 year, then closed.

 

Avg. Age - 1.5 years (2+2+1+1)/4=1.5

 

 

Accurate?

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As others have said, it is average age of all accounts. The closed ones are counted as well as the open ones. Closing the new accounts will have no effect on your average age. They will still count.

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So.. for us shortbus people.

 

 

4 accounts.

2 open for 2 years

2 open for 1 year

 

Avg. Age - 1.5 years (2+2+1+1)/4=1.5

 

 

4 accounts

2 open for 2 years

2 open for 1 year, then closed.

 

Avg. Age - 1.5 years (2+2+1+1)/4=1.5

 

 

Accurate?

The age counted is the age from the day the account is reported opened until today. Whether the account is open, closed, good, bad, does not matter for FICO. The example above is accurate if you are assuming you just closed the two closed accounts this month. If they were opened 6 years ago and only open for 1 year then closed, they would still count as 6 yeas old. All you have to do is look at all the accounts on your report and look at the reported open dates. From the open date till the present, that is the age that goes into your average age of accounts.

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So.. for us shortbus people.

 

 

4 accounts.

2 open for 2 years

2 open for 1 year

 

Avg. Age - 1.5 years (2+2+1+1)/4=1.5

 

 

4 accounts

2 open for 2 years

2 open for 1 year, then closed.

 

Avg. Age - 1.5 years (2+2+1+1)/4=1.5

 

 

Accurate?

 

Correct. The downside to closing an account is only felt after say 10 years, when that TL drops off. Also, for it to impact you, you would need to also be opening new TLs. I mean obviously if you have only 2 TL and then never open anything else, but close 1, then even after the TL drops of, the avg age is the same. So, in the example above, lets fast forward and tweak:

 

6 accounts:

2 open now for 11 years

2 closed but still reporting now for 10 years (even if closed after year 1)

2 open now for 2 years

 

Avg. Age = (11+11+10+10+2+2 / 6) = 7.67 years

 

6 accounts:

2 open now for 11 years

2 WERE opened and then closed after 1 year, and have now DROPPED OFF

2 open now for 2 years

 

Avg. Age = (11+11+2+2 / 4) = 6.5 years

 

So above you see, that until the TLs drop off, there is no impact. However, when you loose those 2 TLs of the accounts you closed after just 1 year, when you fast forward in time, you will see the loss in avg age.

 

This is where you can clearly see that closing one of your older CCs can have a very damaging impact on your avg age (after the TL falls off, which is 10+ years). So the only impact felt immediately from a CC closing is possible from utilization.

 

Hope that helps.

 

SuperG

Edited by SuperG

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I've closed MANY accounts over the years with NO effect upon my FICO. I don't bother keeping accounts open unless they significantly contribute to my overall utilization. I have closed accounts over 12 years old which still show up on my CRAs

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This is exactly what causes the counterintuitive result of lowering one's FICO scores when old COs or other adverse accounts drop off for whatever reason. There is a point where an old baddie can be doing more for your score as a positive in the account age part of the formula than it is hurting you for being a baddie in another part of the formula.

 

I personally had this happen to me when my last couple of COs aged off, and my new accounts were still only about a year old.

 

But, as Jack1212 sez, when it comes to the big things, having a clean report is usually more important than having a high score. That was my experience in securing a mortgage last year.

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My three cents:

1) FICO definitely counts closed TLs in the average age calculation.

2) FICO calculates average age using months (not years as one poster stated). The formula seems to give you full credit for partial months.

3) Closing positive accounts will have a negative impact on your score 10 years from now. Positive closed trades only stay in your credit file for 10 years. Once they drop off, you lose all that history in your average age calculation. My average time in file is not as high as it should be, because all my paid off student loans recently aged right off my file. I don't close any good accounts, even if they do have paltry limits.

Edited by BionicDog

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