- Centurion Member
- Posts: 204
- Joined: Tue Oct 30, 2012 10:25 am
- Location: TX
I know I'll be corrected if I'm wrong, but it's my understanding that everything you have reports for ten years, both active and closed.
So, say you have a Mastercard that you opened five years ago, a clothing store card from three years ago, and a jewelry store card from three years ago. To keep it simple, let's pretend no student loans, no mortgage, no car loans, no nothing... just those three things. It would be 5+3+3 = 11, divided by 3= 3.6, rounded down, = AAoA = 3 years.
Suppose you close the clothing store card and the jewelry store card, keep the Mastercard, don't open anything new, and fast-forward nine years. Closed cards continue to age for ten years, when they fall off.
Your AAoA would be 14+12+12=38/3=12.6=rounded down=AAoA=12 years.
Fast forward another year so that your cards have aged 10 years, and the two closed cards fall off your score. Now, you just have one card open: a 15-year-old Mastercard, and your AAoA becomes 15.
However, in the process, you've dinged yourself on your credit mix (because you've taken away the store cards) and you've dinged yourself on utilization (because you've taken away the credit lines attached to the clothing store card and the jewelry store card) and you've perhaps dinged yourself on payment history, because you have only one item that you're paying on, versus three items showing how great you are paying your bills on time. And remember that AAoA is only 15%, versus 75% on those other three issues in play.
So, open-but-inactive-because-you-don't-use-'em-much accounts contribute to your credit score, because they're open. Accounts that are inactive because they've been actually closed continue to contribute for ten years after closure, but then they disappear. So suddenly, you've got two (hypothetical) twelve-year cards disappearing that wouldn't have dropped off if you'd used them a little bit, plus the other factors.