How is Average Length of Credit determined by the Credit Agencies?

Question

Say I get 10 credit cards in one day and hold them for 10 years. My Average Length of Credit is 10 years.

Say at that point I open and close a credit card in 0.1 year. Is my Average Length of Credit

1. 10 years ((10 cards * 10 years / 10 cards)
2. 9.1 years ((10 cards * 10 years + 1 card * 0.1 year) / 11 cards)

In other words, do the credit agencies calculate Average Length of Credit only using open accounts, or do they calculate it using closed accounts, additionally?

I would like to know this because I've recently become enamored by the sign-up bonuses of credit cards. It is all to easy to open and close multiple cards in a single year just for the 30K miles or $100. I thought that I could simply halt the behavior two years before applying for a major loan (car/house) to get rid of the hard inquiries, but now I am concerned that my average length of credit would go down tremendously by doing this.

Answer 1

This is a snapshot of my average account age. I believe that a number of old closed accounts started to fall off in late 2011, i.e. accounts that were closed 10 years prior. This, and a combination of my last refinance and new credit card (one that netted me $4500 cash profit in 90 day. $100? That's for amateurs) I picked up soon after. Keep in mind, however you value a good score, at some point, the cancelled cards will catch up to you and your average will drop. This factor has medium impact on the score, and I'd suggest that you find a card or two that give 2% back with no annual fee. Keep that card for the long term. This same metric shows my newest account at 2 years 7 months old, right in line with the March '12 drop in age.