Credit Scores and Average Age of Accounts

As the founder and CEO of Cash Flow Partners in New York City, Edward Espinal leads a company that helps raise capital for entrepreneurs, small business owners, and large companies. Under the direction of Edward Espinal, the finance experts at Cash Flow Partners also provide credit repair, credit score analysis, and credit evaluation services.

As modern society trends increasingly toward a cashless economy, credit cards have become ubiquitous. However, credit cards can also be dangerous for those with poor spending habits, which is why some experts recommend that people with debt or credit issues close their credit cards. In some cases, though, closing a credit card can actually hurt an individual’s credit score.

One reason for this is that credit bureaus factor in the “average age of accounts” when calculating a score, rewarding individuals with a long history of credit with a higher score. To figure out the average age of accounts, simply add up the total length of time each credit card has been open and divide by the total number of cards.

For example, a person with two credit cards, one open for 10 years and one open for 2 years, would have an average age of accounts of 6 years (12/2). However, if an individual closes his or her oldest credit card account -- in this example the card open for 10 years -- this would lower the average age of credit accounts, in this case to just 2 years. Because a lower average age of accounts can hurt a credit score, experts recommend that, in most cases, individuals who want to maintain high credit scores keep their oldest credit cards open and pay off the balance.