Understanding a closed account's impact on FICO scores.

[Anonymous]

There is the fact that a closed account stays on your report and counts in you AAoA for a decade.

However i suppose a closed account wouldn't continue to age until it drops off your report. Or does it?

Because assuming you are aiming for maximum score an account with short life span will drag your AAoA down for a decade.

[HeavenOhio]

Accounts will continue to age as long as they stay on your report.

It's possible, although improbable, that an account will drop off earlier than expected. It's also possible that it may stick around much longer than 10 years.

[Anonymous]

Thanks for clearing that up. 

[Anonymous]

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@AnonymousBecause assuming you are aiming for maximum score an account with short life span will drag your AAoA down for a decade.

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Not necessarily.  If you open an account today and close it 1 year from now, 9-10 years from the date you close it you'l have a 10-11 year account being factored into your AAoA.  If your AAoA is less than 10-11 years (which is the case most of the time) this account would be positively impacting your AAoA at that time.  You have to figure that during the course of the 10 years following the closure of an account you are going to be opening new accounts.  This may be just a couple, but depending on the person and circumstances could be a bunch.  All of those new accounts opened during that 10 year span will be younger than your short life span account that is actually helping your AAoA more [relatively] than any of those newer accounts.  Hopefully that sort of makes sense.

[Anonymous]

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@Anonymouswrote:

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@AnonymousBecause assuming you are aiming for maximum score an account with short life span will drag your AAoA down for a decade.

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Not necessarily.  If you open an account today and close it 1 year from now, 9-10 years from the date you close it you'l have a 10-11 year account being factored into your AAoA.  If your AAoA is less than 10-11 years (which is the case most of the time) this account would be positively impacting your AAoA at that time.  You have to figure that during the course of the 10 years following the closure of an account you are going to be opening new accounts.  This may be just a couple, but depending on the person and circumstances could be a bunch.  All of those new accounts opened during that 10 year span will be younger than your short life span account that is actually helping your AAoA more [relatively] than any of those newer accounts.  Hopefully that sort of makes sense.

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I was under the impression that an account doesn't age if closed. That was the assumption here. Since this isn't the case my theory doesn't stand.

[Anonymous]

Understood.  Closed accounts do continue to age and have the same impact on age of accounts as open accounts do.  The only footnote is that they are of course due to fall off at some point, meaning their age of accounts impact is only going to be felt for a finite amount of time, generally speaking.

[NRB525]

OP you have to consider, “If I were building the algorithm, how would I calculate AAoA?”

The hard way is to start with First Month Reporting for each account, then think it may be possible to find a Closed date, then align that to the Open date, if no Closed date use today, add up the age of the various accounts and divide by number of accounts. 

The easy way is to use the First date for all accounts open and closed, add up that age to today, and divide by number of accounts. 

I think the easy way is more likely, and that means I think Closed accounts continue to help your AAoA.