When applying for a mortgage, your credit score plays a central role in determining whether you are approved, what interest rate you receive, and the overall terms of your loan. One factor influencing that score is the Average Age of Accounts (AAOA). Though less talked about than credit utilization or payment history, AAOA can significantly impact how lenders view your financial reliability.
In real estate, where large loans and long-term commitments are involved, a strong AAOA can make the difference between getting a favorable mortgage rate or paying thousands more over the life of your loan. This guide breaks down what AAOA is, why it matters, how it’s calculated, and the role it plays in real estate lending.
An Overview of AAOA
What is Average Age of Accounts?
The Average Age of Accounts (AAOA) is a credit metric that measures the average length of time your credit accounts have been open. It provides lenders with a picture of your credit history’s maturity.
Older AAOA: Suggests stability, long-term credit use, and financial responsibility.
Newer AAOA: May suggest limited experience with credit, which can be a red flag for lenders.
Why Lenders Care About AAOA
Lenders see borrowers with a longer AAOA as lower risk because they’ve demonstrated the ability to maintain credit responsibly over time. Conversely, someone with a shorter AAOA may not have enough history for lenders to confidently predict future payment behavior.
How AAOA is Calculated
Add Up All Accounts: Include open and closed credit accounts (loans, credit cards, lines of credit).
Calculate the Age of Each Account: Measured from the date the account was opened.
Average Them Together: Divide the total combined age by the number of accounts.
Example:
Credit card opened 10 years ago
Auto loan opened 5 years ago
Student loan opened 2 years ago
Total = 17 years ÷ 3 accounts = 5.67 years AAOA
The Role of AAOA in Credit Scoring
Weight in Credit Models
FICO Score: AAOA falls under “Length of Credit History,” which makes up about 15% of your credit score.
VantageScore: Similar weight, emphasizing the importance of long-term account management.
Influence on Mortgage Applications
Higher AAOA → Better chance of favorable loan terms.
Lower AAOA → May lead to higher interest rates or stricter conditions.
AAOA in Real Estate Lending
Why AAOA Matters for Mortgages
Lower Risk for Lenders: Indicates you’ve successfully handled credit over long periods.
Interest Rate Impact: Even a small difference in credit score can add up to thousands in interest payments over a 30-year mortgage.
Approval Odds: A mature credit history can tip the scales toward approval if you are on the borderline.
Example Scenarios
Borrower A: AAOA of 12 years, strong payment history. Likely to qualify for a lower interest rate.
Borrower B: AAOA of 2 years, limited credit history. May need to accept higher rates or provide additional documentation.
Factors That Affect AAOA
Opening New Accounts: Each new account lowers your average.
Closing Old Accounts: Removing old accounts shortens your credit history.
Authorized User Accounts: Being added to someone else’s old account can increase AAOA.
Mix of Credit Types: Installment loans and revolving credit together may influence overall score indirectly.
How to Improve Your AAOA
Keep Old Accounts Open: Even if unused, they add length to your credit history.
Limit New Accounts: Avoid opening multiple new credit cards or loans before applying for a mortgage.
Be an Authorized User: Ask a trusted family member to add you to an older account.
Strategic Timing: Delay new accounts until after your mortgage closes.
Benefits of a Longer AAOA
Better Loan Offers: Lenders may offer lower rates and higher approval chances.
Financial Reputation: Signals reliability and experience.
Stable Credit Profile: Helps offset high credit utilization or recent hard inquiries.
Risks and Misconceptions
AAOA Alone Doesn’t Guarantee Approval: Other factors like income, debt-to-income ratio, and payment history still weigh heavily.
Closed Accounts Still Count: Many borrowers assume closed accounts don’t matter, but they do (until they fall off your report).
Quick Fixes Don’t Exist: AAOA grows slowly over time; strategies can help, but patience is key.
Real Estate Implications
For First-Time Buyers
A short AAOA is common, but lenders may balance it with strong income and low debt.
Programs like FHA loans are more flexible with limited credit history.
For Experienced Borrowers
Longer AAOA can strengthen negotiations with lenders.
Can offset other weaknesses, such as higher debt-to-income ratios.
For Investors
Maintaining older lines of credit helps ensure smoother financing for multiple properties.
Institutional lenders often favor applicants with long credit histories for bulk deals.
Case Studies
Case 1: The First-Time Buyer
Maria, 26, has an AAOA of 2.5 years. She’s approved for a mortgage but receives a slightly higher interest rate compared to borrowers with more mature credit histories.Case 2: The Established Borrower
James, 45, has an AAOA of 15 years. His strong credit profile earns him not only approval but also a lender credit toward closing costs.Case 3: The Investor
A real estate investor with multiple long-standing accounts secures financing for four rental properties at once, benefiting from lender confidence.
Frequently Asked Questions
What is AAOA in credit reports?
It’s the average length of time your accounts have been open.How much does AAOA affect credit scores?
It’s about 15% of your FICO score.Do closed accounts count toward AAOA?
Yes, until they fall off your credit report (usually after 7–10 years).What lowers AAOA?
Opening new accounts or closing old ones.
Can I raise AAOA quickly?
Not directly, it takes time, though becoming an authorized user can help.Does AAOA matter for mortgages?
Yes, lenders use it as part of assessing risk and setting loan terms.What’s a good AAOA?
Generally, 7+ years is considered strong.Do car loans and student loans count?
Yes, all credit accounts factor into AAOA.Can a short AAOA prevent me from buying a home?
Not necessarily, but it may limit your loan options or raise costs.How do I check my AAOA?
You can calculate it manually from your credit report or use tools offered by credit monitoring services.
Related Terms and Concepts
Credit History: The record of how you’ve managed debt over time.
FICO Score: The most widely used credit scoring model in mortgage lending.
Debt-to-Income Ratio (DTI): The share of your income that goes toward debts.
Hard Inquiry: A lender’s credit check that can temporarily affect your score.
Payment History: The record of on-time or late payments, the most important factor in credit scoring.
Credit Utilization: The percentage of credit used compared to available limits.
Mortgage Pre-Approval: A lender’s evaluation of your financial profile to determine loan eligibility.
Credit Mix: Having different types of credit accounts, such as revolving and installment.
Wrap Up – Average Age of Accounts (AAOA)
The Average Age of Accounts may not be the most widely discussed factor in credit scoring, but its impact on real estate is undeniable. Lenders use AAOA to gauge financial maturity, stability, and the likelihood of responsible repayment. A longer AAOA strengthens credit scores, leading to lower interest rates, better loan terms, and higher approval chances.
For buyers, homeowners, and investors alike, understanding AAOA provides insight into how credit history affects real estate opportunities. While it cannot be improved overnight, maintaining old accounts, avoiding unnecessary new accounts, and practicing consistent financial responsibility will ensure your AAOA grows stronger over time. In the world of mortgages and property investing, time is truly your ally.
