15 percent of your credit score is determined by the age of your accounts. Like wine, the older the better.
This component takes a look at both the age of individual accounts, as well as the average age of your accounts. In this way, each time you open a new account, the average age is lowered, and your score could drop. For instance, if you have three ten-year-old accounts, the average age of your accounts is ten years. But if you open another account, the average age drops to 7.5 years. As such, try to keep old accounts open. I recently decided to open a new credit card that offered a great rewards program. This credit card was intended to replace another rewards credit card that was inferior. That said, I kept the older credit card active, and I plan to keep paying the annual fee, because I know that my credit score is benefiting from the account’s age.
Remember from Part II that the credit-scoring models might deduct points if you open a new account. However, your score will begin to recover after six months of timely payments. With this in mind, I always tell people not to open new lines of credit if they plan on making a major purchase (home or car) in the next six months.
What makes up a credit score? Part I: Your payment history.
What makes up a credit score? Part II: Outstanding debt.
What makes up a credit score? Part IV: The type of credit you have.