Originally Posted by
MrMoonlight
So let me understand this; the account age continues to increases every year, even for the accounts you close? In other words, if I opened an account for a particular card five years ago, and closed it out after six months, the age of that account would be five years, not six months?
Correct. Think of it this way: The piece of data on your report is the date you opened the card. When the FICO is calculated, the system computes the age of each account at that moment, in real time, without regard to open or closed status, then takes the average across all the accounts.
The purpose of AAoA is to understand how "steady" you are in using credit. If it's very low, it indicates you have intense activity recently, which could indicate risk that you're about to go broke. If it's high, it means you've taken a long term view on credit, keeping your cards for the long term - or, if you have many (churning) accounts, demonstrating you can manage many cards in the long term. Either of those is less risky than someone who has "ramped up" applications recently.