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2 years ago
Tue May 03, 2022 11:39 am
BrutalBodyShots
Senior AdministratorGoodwill Saturation Technique Author
BrutalBodyShots has been gardening for over 2 years.
BrutalBodyShots has achieved the Garden Goal !!
BrutalBodyShots has achieved the Garden Goal !!
Hey everyone. I've been giving thought to "length of credit history" recently, specifically how AoOA is measured/considered. As we all know a closed account is expected to typically stick around on a credit report for roughly 10 years. We often give the solid recommendation to acquire an open ended account (revolver) early on in one's credit journey and to keep that card active/open indefinitely as to continue to grow AoO(R)A.
What does kind of bother me a bit that I'm trying to wrap my head around and work out is the elimination of credit history depth due to account closures. I'm assuming that there's some sort of data out there that suggests that if someone keeps their first open ended account longer (20 years, 30 years, 40 years, etc) it somehow makes them a slightly lesser risk of default, but I don't know that it really feels accurate to me. I'm curious to hear opinions on this.
To sort of illustrate my thought process, let's look at 2 examples.
Cornelius at 20 years of age opens 1 bank card and keeps it open forever. He opens no other revolvers throughout his life. At the age of 70 he has an AoOA/AoORA/AAoRA of 50 years.
Rupert at 20 years of age opens 1 bank card and keeps it open for 7 years. Just prior to closing his first card he opens a new revolver to replace it. When the new revolver reports, he closes the original card. Rupert repeats this process throughout his life, every 7 years opening 1 new card and then closing his other card that's 7 years old. At the age of 70, he would have opened his 8th card ever the previous year. His AoOA/AoORA would be ~15 years from the card he opened at 55 years old and closed at 62 years old and his AAoRA would be ~8 years with the 3 revolvers (1 open, 2 closed) on his CR.
At age 72 Rupert's AoOA/AoORA would fall to ~10 years with his AAoRA landing around 6.5 years. Cornelius of course at 72 would have an AoOA/AoORA/AAoRA of 52 years.
While dramatically different in their handling of revolvers, let's assume for the sake of this discussion that both handled installment loans identically throughout their lives... maybe opening/closing one every 3-5 years on average so maybe they each at 70 years of age have 1 open installment loan and 2-3 closed installment loans on their CR. I don't think this is really relevant to this conversation on the subject of their revolvers, but I want it to be a constant variable between the two profiles.
I guess what I'm struggling with is whether or not Cornelius really has "better" depth of credit history with that AoOA/AoORA/AAoRA of 50 years relative to Rupert's file. Both have for all intents and purposes managed 1 revolver at a time for 50 years. What do you all think about this topic?
What does kind of bother me a bit that I'm trying to wrap my head around and work out is the elimination of credit history depth due to account closures. I'm assuming that there's some sort of data out there that suggests that if someone keeps their first open ended account longer (20 years, 30 years, 40 years, etc) it somehow makes them a slightly lesser risk of default, but I don't know that it really feels accurate to me. I'm curious to hear opinions on this.
To sort of illustrate my thought process, let's look at 2 examples.
Cornelius at 20 years of age opens 1 bank card and keeps it open forever. He opens no other revolvers throughout his life. At the age of 70 he has an AoOA/AoORA/AAoRA of 50 years.
Rupert at 20 years of age opens 1 bank card and keeps it open for 7 years. Just prior to closing his first card he opens a new revolver to replace it. When the new revolver reports, he closes the original card. Rupert repeats this process throughout his life, every 7 years opening 1 new card and then closing his other card that's 7 years old. At the age of 70, he would have opened his 8th card ever the previous year. His AoOA/AoORA would be ~15 years from the card he opened at 55 years old and closed at 62 years old and his AAoRA would be ~8 years with the 3 revolvers (1 open, 2 closed) on his CR.
At age 72 Rupert's AoOA/AoORA would fall to ~10 years with his AAoRA landing around 6.5 years. Cornelius of course at 72 would have an AoOA/AoORA/AAoRA of 52 years.
While dramatically different in their handling of revolvers, let's assume for the sake of this discussion that both handled installment loans identically throughout their lives... maybe opening/closing one every 3-5 years on average so maybe they each at 70 years of age have 1 open installment loan and 2-3 closed installment loans on their CR. I don't think this is really relevant to this conversation on the subject of their revolvers, but I want it to be a constant variable between the two profiles.
I guess what I'm struggling with is whether or not Cornelius really has "better" depth of credit history with that AoOA/AoORA/AAoRA of 50 years relative to Rupert's file. Both have for all intents and purposes managed 1 revolver at a time for 50 years. What do you all think about this topic?
- Tagline Goodwill Saturation Technique Author
- Classic 8 Scorecard CLEAN/THICK/MATURE/NO-NEW-REVOLVER
- Mortgage Scorecard CLEAN/THICK/MATURE/NO-NEW-ACCOUNT
- AoOA 266 months
- AoORA 266 months
- Date of Last Inquiry and/or New Account Opening May 23rd, 2022
- Garden Goal 24