A rebucketing coincidence

[vanillabean]

In a little over a half a year from now, my AAoA will hit the 5 year mark. It's my understanding that my score at that time might dip a bit due to rebucketing.

It's around then I'd like to apply for a Discover card, having recent inquiries well outside the one year window.

Would it be fair to say that a potential score dip will matter less to the CCC than the various benefits of aging?

In other words, should I apply later than sooner?

[RobertEG]

What is called "rebucketing" is a deep secret in the proprietary FICO scoring process.

It is a preliminary logic tree analysis of your entire credit file which is used to determine which of the dozen of so different algorithms you will be scored under.

Your concern is apparently that improvement in a FICO scoring category will cause you to shift to a new scoring "bucket," thus causing you to be compared with a new, and higher, bracket of consumers.  That is the general case.

In your situation, I would not be too concerned.  First of all, length of credit history is third on the FICO weighting list, at only about half of the impact of payment history and current utilization.  Logic would lead one to believe that AAoA is not a major rebucketing branch on the logic tree.

If an improvement in one category puts you into a bucket that puts less weight on that category, then it will concurrently put more weight on one or more other categories.  A fact of math.

I dont think that movement to 5 years AAoA will cause FICO scoring to score you less-favorably.  I have never seen anything published that establishes any magical impact, plus of minus, of 5 years AAoA. 

In the end, movement to a better FICO bucket will almost always be to your benefit.  It is not a one-category game.  It is always better to improve in each category.

[vanillabean]

RobertEG wrote:

"I dont think that movement to 5 years AAoA will cause FICO scoring to score you less-favorably."

Thank you very much for your feedback. I think I'll wait to apply until after the 5 year mark. The bonus will be that I'll get to observe any fluctuations in the score around the mark.

But it's sort of ironic that as soon as I pass the mark, a new card will put me right back. Or of course I can wait long enough that the decrease in AAoA will still leave me above the 5 years.

Here are the two scenarios:

1) Let's say you have four credit accounts whose AAoA is 5 years. You get a new card, and the AAoA drops to 4 years; ((4 * 5) + 0) / 5 = 4. A year goes by, at which time the AAoA is once again 5.

You get a sixth card, and the AAoA drops to 4.2 years; ((5 * 5) + 0) / 6 = 4.2. 0.8 year goes by, at which time the AAoA is once again 5.

You get a seventh card, and the AAoA drops to 4.3 years; ((6 * 5) + 0) / 7 = 4.3. 0.7 year goes by, at which time the AAoA is once again 5.

You get an eighth card, and the AAoA drops to 4.4 years; ((7 * 5) + 0) / 8 = 4.4. 0.6 year goes by, at which time the AAoA is once again 5.

Nice. Not much waiting with every new card.

2) Instead of getting that fifth card at the time, you wait a year, at which time the AAoA is 6 years.

You get a new card, and the AAoA drops to 4.8 years; ((4 * 6) + 0) / 5 = 4.8. Wait a bit. How did we drop more than a year?

So instead you wait another three months to get the card. The AAoA drops to 5 years; ((4 * 6.25) + 0) / 5 = 5. A year goes by, at which time the AAoA is once again 6.

You get a sixth card, and the AAoA drops to 5 years; ((5 * 6) + 0) / 6 = 5.0. A year goes by, at which time the AAoA is once again 6.

Who has the patience for that?

1) 1 + 0.8 + 0.7 + 0.6 = 3.1, so 4 cards in 3.1 years, AAoA is 5.

2) 1.25 + 1 + 1 = 3.25, so 2 cards in 3.25 years, AAoA is 6.

Assuming everything is otherwise clean from beginning to end, I wonder which score swings are to be expected throughout each of the two time periods.

[MarineVietVet]

Your AAoA is the sum of the ages of every account (except CA collections) on your report, whether open or closed, calculated in months, divided by the number of accounts and then divided by 12. I use the division by 12 to make it easier to convert into years. This is measured from the time each account was opened until present.

You’ll need to figure the age of each account, open or closed, on each report. If all three reports are identical (very unlikely), you're in luck; otherwise, you'll need to run this for each report.

You'll get much more accurate numbers calculating AAoA this way. At least I do. And remember that AAoA is rounded down so for example an AAoA of 5 years, 11 months is looked at the same as 5 years, 1 month.

From a BK years ago to:
9/09 EX pulled by lender 802
3/10 EQ- 800
6/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
Common Abbreviations
Frequently Requested Threads
Whats In Your FICO Score

[RobertEG]

Length of credit history is only 15% of total FICO score, and all of that is not based solely only on AAoA.  Length of oldest account also factors in.

AAoA is not a major factor in credit scoring. I would not use AAoA as a major factor in future quests for credot score.

When you get a new account, sure, it will factor into you AAoA.  But it also gives you increased CL, and thus reduces % utill.  It may improve your mix of credit, and move you from a lean to thick credit file.