Average Age Of Credit Cards With Multiple Cards
Part of your Credit Score
The Average age of your credit cards is a factor on your credit score. If you regularly apply for new credit cards it is worth understanding how it might affect your score. This is primarily an exercise in crunching numbers to get a feel for how opening new credit and cancelling credit might change the average ago of credit cards and other credit accounts. There is no conclusion, just a better understanding of the numbers.
Impact on Your Score
The length of your credit history will account for 15% of the average person’s credit score. This 15% is not a hard and fast rule as the percentages change based on your profile. The score includes the following:
- the age of your oldest account
- the age of your newest account
- the average age of all your accounts
- how long ago specific accounts were established
- how long ago since specific accounts were used
Even with the potential variation in that 15%, the average age of credit cards is going to account for a small percentage of your overall credit score. This is especially true if you have other accounts, such as lines of credit, which also factor into the average age.
Impact of Cancelling on the Average Age of Credit Cards
The age of a credit card (or any revolving account) is based on the month it was opened. When you cancel an account it does not immediately impact the age of the account or the average age of credit cards and other accounts you hold. The account will continue to age until it drops off of your credit record. In Canada this normally occurs 6 years after being closed. In the United States it is 10 years for an account closed in good standing. The maximum age of an account is therefore 6 years plus the age at which you cancelled it in Canada.
Calculating Average Age of Credit Cards
I tried calculating the average age of credit cards with a spreadsheet but it was just too difficult. After thinking about it (always a good thing) I realized that the math was very simple. As an exercise, let us assume you have no credit cards and apply for any number of cards today and cancel them in one year. The average age of those cards in 1 year will be 1, in 5 years will be 5 – it doesn’t matter how many cards as long as it’s the same number every year. The oldest those cards will be is 7 years, just before they age off (1 year open + 6 years closed before aging off). If you don’t cancel them, then after 7 years your average age of credit cards will keep going up.
If you apply for the same number of cards (let’s say 3) at the same time every year and cancel them after 1 year, the average of your cards will be:
- year 0: 3×0/3 = 0 years
- year 1: (3×1 + 3×0)/6 = 3/6= 0.5 years
- year 2: (3×2 + 3×1 + 3×0)/9 = 9/9 = 1 year
- year 3: 18/12 = 1.33 years
- year 4: 30/15 = 2 years
- year 5: 45/18 = 2.5 years
- year 6: 63/21 = 3 years
- year 7: 84/24 = 3.5 years
Note that the age is actually done in months, not years, but the numbers are bigger and look a lot more ugly. What you will find is that after 7 years the average age will climb from 3 to 3.5, then drop to 3 and repeat as cards age off. If you get a different number of cards every year then there are way too many options and you’ll have to do the math yourself ;).
If you have cards you plan to keep then add all their ages to the numerator and the number of cards to the denominator (remember those pesky math terms?). The numbers above will go up any time you don’t cancel a card. If you have a 20 year old card when you start cycling 3/6 cards per year, the average age of your cards would be:
|Cycle 3 cards||Cycle 6 cards|
|year 0||20/4 = 5 years||20/7 = 2.9 years|
|year 1||23/7= 3.3 years||26/13= 2 years|
|year 2||29/10 = 2.9 years||38/19 = 2 years|
|year 3||38/13 = 2.9 years||56/25 = 2.2 years|
|year 4||50/16 = 3.1 years||80/31 = 2.6 years|
|year 5||65/19 = 3.4 years||110/37 = 3 years|
|year 6||83/22 = 3.8 years||146/43 = 3.4 years|
|year 7||104/25 = 4.2 years||188/49 = 3.8 years|
So the more cards you cycle through, the less effect older non-cancelled cards have. That’s pretty obvious. But if you’re always cycling through the same number of cards you won’t ever drop below an average of 3 years after you reach year 6.
What does all this mean? That depends on a lot of factors. You don’t need an average age of 2 years to have a score over 700 if you manage the other factors well.
Not cancelling cards that don’t cost you money will help the average age. Just use them occasionally as if they aren’t used they factor less into your score and may be cancelled.
A higher average age of credit cards (or rather all your accounts) will help. How much better is an average of 3 over an average 2, or worse than an average of 10? Unfortunately I’ve not found much out there that tells you. The formulas are proprietary and there isn’t enough data showing people who have an old credit card, a variety of credit products, keep low balances and yet have a low average age of credit cards.
Keep in mind that the average age of accounts includes more than your credit cards. This should at least give an idea of the effect on the average age of credit cards if you get new cards regularly.