Average age of accounts questions

[Anonymous]

I'm hoping someone can help me understand AAoA.  I hadn't really used credit until last spring when we decided to buy a house, until last April the only accounts I'd had was for car loans.  This causes me to have a short history.  I am considering trading in my car at some point, do car loans play into AAoA or just credit cards?  Would my car loan being closed shorten my credit ever further or does it stay for a while?

[Anonymous]

Yes, car loans factor in and no closing a current loan will not lower your AAoA. It will stay in your file for up to 10 years. However, if it is your only installment loan, closing it may lower your Fico score since it will no longer be included in the credit mix factor.

[Anonymous]

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@Anonymous wrote:

Yes, car loans factor in and no closing a current loan will not lower your AAoA. It will stay in your file for up to 10 years. However, if it is your only installment loan, closing it may lower your Fico score since it will no longer be included in the credit mix factor.

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But the new car loan would make up for closing it? Or am I wrong?

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

Yes, car loans factor in and no closing a current loan will not lower your AAoA. It will stay in your file for up to 10 years. However, if it is your only installment loan, closing it may lower your Fico score since it will no longer be included in the credit mix factor.

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But the new car loan would make up for closing it? Or am I wrong?

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Initially, no. It would hurt your score. This is because the ratio of balance owed to original amount would be high. As you pay it down, your score would recover.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Yes, car loans factor in and no closing a current loan will not lower your AAoA. It will stay in your file for up to 10 years. However, if it is your only installment loan, closing it may lower your Fico score since it will no longer be included in the credit mix factor.

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But the new car loan would make up for closing it? Or am I wrong?

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Initially, no. It would hurt your score. This is because the ratio of balance owed to original amount would be high. As you pay it down, your score would recover.

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Thank you 

[takeshi74]

Don't overlook this and the stickies:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Follow the link on calculating AAoA.

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@Anonymous wrote:

But the new car loan would make up for closing it? Or am I wrong?

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It's not so straightforward as you're assuming.  You can't just swap out credit accounts to mitigate scoring impact.  On top of that, impact depends on one's credit profile and how all the factors in the link above add up after the change.  With your thin profile you'd likely see bigger negative impacts.  I added an auto loan back in 2014 with little to no impact but my profile is thicker and in good standing.

Closing doesn't decrease your AAoA (not immediately) but opening does.  A new installment has a high balance to loan ratio which is a negative factor though it's nowhere near the same impact as high revolving utilization on revolving accounts.