Average Age of Account...true or false?

[techcrium]

True or false?

If you are 18 and you apply to 10 credit cards and somehow magically get approved to all of them....

then by the time you are 28 and ready for a car loan/mortgage, your average age of account is 10 years and you have 10 credit cards with a solid history.

Assumption: You pay off all your bills on time of course.

[pizzadude]

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@techcrium wrote:

True or false?

If you are 18 and you apply to 10 credit cards and somehow magically get approved to all of them....

then by the time you are 28 and ready for a car loan/mortgage, your average age of account is 10 years and you have 10 credit cards with a solid history.

Assumption: You pay off all your bills on time of course.

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Yes, assuming that you did not open any new credit accounts, and that your accounts all remained open during the 10yrs that would be accurate.

[Stanic413]

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@pizzadude wrote:

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@techcrium wrote:

True or false?

If you are 18 and you apply to 10 credit cards and somehow magically get approved to all of them....

then by the time you are 28 and ready for a car loan/mortgage, your average age of account is 10 years and you have 10 credit cards with a solid history.

Assumption: You pay off all your bills on time of course.

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Yes, assuming that you did not open any new credit accounts, and that your accounts all remained open during the 10yrs that would be accurate.

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  Opening any new accounts in those 10 years will bring your AAoA down. 

[vanillabean]

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@Stanic413 wrote:

Opening any new accounts in those 10 years will bring your AAoA down.

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Agreed. There is no way someone that app spree happy can stay that low for that long, unless sedated.

[techcrium]

The point is that once you turn 18, you should apply to as many credit cards as you possibly can because by the time you are 25-26 and ready for a car loan/mortgage, you will have 10 cards with a solid history.

And all those early credit hits would be wiped out by then.

This is assuming you are responsible with paying off all credit card bills.

[CreditMagic7]

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@Anonymous-own-fico wrote:

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@Stanic413 wrote:

Opening any new accounts in those 10 years will bring your AAoA down.

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Agreed. that app There is no way someone spree happy can stay that low for that long, unless sedated.

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You really think that would work?

[techcrium]

Well, I am an example of it.

I have 18 open accounts, 1:1 annual income to credit ratio, never paid a 1 cent interest, reaped over $3000 worth of rewards.

In 5 years time when I am ready for a home, all my crazy credit card hits will be wiped out and I will have 18 accounts with solid history.

In my final 3 years, I will of course lay off the cc applications frenzy.

This strategy is obviously not for everyone, but only those who are responsible enough to treat credit card as a debit card and not spend, spend, spend.

[Stanic413]

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@techcrium wrote:

Well, I am an example of it.

I have 18 open accounts, 1:1 annual income to credit ratio, never paid a 1 cent interest, reaped over $3000 worth of rewards.

In 5 years time when I am ready for a home, all my crazy credit card hits will be wiped out and I will have 18 accounts with solid history.

In my final 3 years, I will of course lay off the cc applications frenzy.

This strategy is obviously not for everyone, but only those who are responsible enough to treat credit card as a debit card and not spend, spend, spend.

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Yes, but I think your original question was will your average age of accounts be 10 years.  And the answer is yes if you do not open any new accounts.  I'd absolutely have to be sedated.  That's way too long.      

[p-]

A large number of early accounts will help AAOA down the road.  That applies to an 18 year old looking at 28, or a 50 year old looking at 60.  Realistically, if you have ten years experience managing credit well you are likely a safe borrower, whether you're 28 or 60.  I don't see that as cheating the system.

But chances are you won't want to spend the next fifty years managing ten cards, nor do you have to.  Old accounts help you, but they don't necessarily have to be credit cards.  I would focus on getting a "Member Since Date" fixed with Amex, as that will never go away, and build a stable of a few good prime cards you can keep for the long term.

I would worry less about AAOA as it seems to not be much of a hurdle.  My oldest account is 11 years, but my AAOA is only 5 years.  My EX FICO was 797 at last check, with 27% utilization reported.  I get approved for every car loan, home loan, and credit card that my income will justify, with no hassle and no rate markup, and have since I got above 730.

My tactics are a bit more conservative, as I am not willing to sacrifice too many points now for an incremental gain a decade later.  I have a stable of a five prime cards that are growing with me, and plan to keep them four of them open indefinitely.  I am able to harvest a reasonable amount of rewards with the rotating categories on two of them, and the unlimited cashback on another.  I got better cards and better limits early by being conservative, and they are paying off well now that they are a few years old.

In six months, my reports will be clear of any derogs and I will cross 800 on all 3.  AAOA appears not to be a major factor with a thick file for scoring or approval, so I wouldn't sacrifice too many points now to get there later.  It's not worth it.

[Revelate]

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@techcrium wrote:

The point is that once you turn 18, you should apply to as many credit cards as you possibly can because by the time you are 25-26 and ready for a car loan/mortgage, you will have 10 cards with a solid history.

And all those early credit hits would be wiped out by then.

This is assuming you are responsible with paying off all credit card bills.

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While I agree with your premise, in practice it's not necessary:  10 cards when just starting out, unless you can qualify for a few of the reasonable student cards, is 10 junk cards... and by the time 7-8 years have past, it would be virtually no different than my starting out with 3, going to 7 at the one year mark, and 10 at the 2 year mark (though I closed one, irrelevant to AAOA in the timeframe we're talking about) given how the FICO algorithm works with massive diminishing returns especially with AAOA north of 5 years or so.

Also anyone in that age bracket is going to have vastly different expenses post graduation and with real income, than they would at 18 and they really should upgrade their credit portfolio at some point.  Also things like buying a car are likely going to happen before that point too in many markets, as are financing things like a bed if htey can't outright pay cash for it, and all of those are going to drag on one's AAOA anyway.

Now if I were building credit for a kid of mine, I'd have the majority of accounts opened within a year and that would likely cover them for the majority of those 8 years, but out in normal consumer land, people aren't likely to be smart about their credit card portfolio building and as such likely won't be as precise as people armed with information from this forum tend to be