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AAoA. What's Optimal, Good, OK, and Bad

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Anonymous
Not applicable

AAoA. What's Optimal, Good, OK, and Bad

What's the forum concensus regarding AAoA (Average Age of Accounts) and what's considered bad (low experience), acceptable, good, and optimal in relation to credit scoring?  I'm looking for something general like credit card utilization (0% is good but not optimal, 1-9% is optimal, 10-29% good but not optimal, 30-49% ok, 50%+ bad)

 

In the last few months i just opened Cap1 QS1, Credit1 (and closed it after a couple weeks), DCU Platinum Visa, and a DCU auto refi.  My oldest account is 16.6 years old and my AAoA is 6.8 years.  I want to apply for a couple more cards and call it a quits (gardening) but i don't want to significantly impact my score because of my AAOA being too low.  Side note: i'm looking to get a mortgate at years end.

Message 1 of 23
22 REPLIES 22
Revelate
Moderator Emeritus

Re: AAoA. What's Optimal, Good, OK, and Bad

There's no set standard.

 

<2 years, basement.

 

>2 - 5 years: OK

 

5+ there's pretty significant diminishing returns.

 

I guess optimal would be the minimum AAOA it takes to hit 850, and don't know if anyone has tracked their scores closely enough over time to get to 850 and see where the magic threshold number is.

 




        
Message 2 of 23
Anonymous
Not applicable

Re: AAoA. What's Optimal, Good, OK, and Bad

Hello Slipper.  Do you mind telling us how many open credit cards you have right now, how many total accounts you have (open and closed), and some idea of what your score is?

 

My personal feeling is that your upcoming mortgage (in less than 5 months from now!) should drive every decision you make.  If you already have (say) three credit cards currently, then personally I would drop the idea of getting more cards.  Wait until the mortgage is completely finalized.  Then, in spring 2016, apply for whatever cards you like.

 

The more abstract question you raise is interesting, but as Revelate observes, hard to know the answer to because different profiles behave differently.  I "get" your comparison of it to Total Utilization (of credit cards) -- but there's a key practical way it is different. 

 

Basically, CC utilization is easy for any individual to test in a harmless way: he can just play with his CC balances and see what happens.  Any score "damage" he causes is very temporary (e.g. comparing his total U of 31% vs. 15% vs. 8% vs. 4%).  Because it is so easy and so harmless to test, there is therefore a wealth of anecdotal test data by people here at myFICO.  The bottom line is that it has been proven that if a person just uses his CCs and lets them report naturally (or any other strategy that avoids them getting close to being maxed out) -- all he needs to do just before the crucial pull is to zero out all CCs but one and let that remaining card have a balance < 9% of its credit limit.  This will get him the most points he can expect related to his CC balances.  Typically that ends up with a total U of 1-3%.  This works across virtually any profile.

 

No such test data exist for AAoA because the harm you do is not reversible.  Therefore you don't see hundreds of people on the site playing with their AAoA, changing it month by month, watching it go up and down, and documenting the results (and doing so while describing the rest of their profile to the broader community).  You have occasional one-time reports, but nothing in any way like what you have with CC util.

 

There's another important issue, which may be lurking at the back of your decision, which is that it is by no means clear that AAoA is the only factor that causes damage to your score upon adding a new card.  There are "reason codes" out there, for example, that suggest that FICO looks at whether  you have opened any new revolving lines of credit recently (and if so how many).  Two people with the same AAOoA may pose different levels of risk if one of them has opened a new CC recently.

 

Finally note that score impact is not the only issue when thinking of your credit profile before a mortgage.  In brief, it is likely that the underwriter will look at your reports himself.  If he sees that you are opening a number of credit cards in the year prior to the mortgage, that might be a red flag for him.  You have applied for a number of cards recently already.  That's another reason that you may be best served by stopping all further card applicationns for at least five months prior to the final underwriting (six months would in my opinion be better).

 

 

Message 3 of 23
jamie123
Valued Contributor

Re: AAoA. What's Optimal, Good, OK, and Bad

Very well said CreditGuyInDixie! Great advice there! ^^^^^^^^^^^^^^^^^^^

 

+1


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 4 of 23
Anonymous
Not applicable

Re: AAoA. What's Optimal, Good, OK, and Bad

Helpful response. I gave Kudos to you.

 

I can provide a data point to show that the 1 yr time point may be a threshold for AAoA. I just got a new card reporting to the 3 Bureau agencies, which increases my credit limit by 30% but drops my AAoA from 1 yr 4 m to 11 months. As a result, my EQ score drops from 750 to 740 by 10 points. No inq reported to EQ for the recent 2 yr. Certainly, I don't know if my total score plays a rule as well. My TU at the same time increased by 5 points from 731 to 736 despite that there is a new inq reported to TU. But I think the AAoA passing the 1 yr bar plays some role for my EQ score drop. Hope this is helpful.

Message 5 of 23
Revelate
Moderator Emeritus

Re: AAoA. What's Optimal, Good, OK, and Bad


@Anonymous wrote:

Helpful response. I gave Kudos to you.

 

I can provide a data point to show that the 1 yr time point may be a threshold for AAoA. I just got a new card reporting to the 3 Bureau agencies, which increases my credit limit by 30% but drops my AAoA from 1 yr 4 m to 11 months. As a result, my EQ score drops from 750 to 740 by 10 points. No inq reported to EQ for the recent 2 yr. Certainly, I don't know if my total score plays a rule as well. My TU at the same time increased by 5 points from 731 to 736 despite that there is a new inq reported to TU. But I think the AAoA passing the 1 yr bar plays some role for my EQ score drop. Hope this is helpful.


Could be, the other question I'd have is what was your most recent account before that?  Is a new account penalty of some sort that shows up in the reason codes, but not really certain what that time period happens to be.

 

I didn't get one in the one year boundary on FICO 04 with my Beacon 5.0 tracking, I did see a back and forth as I went across the 2 year boundary.  Was long held previously that anything under 2 years was rounded to 1 year, but that data was all on FICO 04 and previously.  Could've changed in FICO 8.




        
Message 6 of 23
Anonymous
Not applicable

Re: AAoA. What's Optimal, Good, OK, and Bad

The latest account report is just a few days ago. There could be a penalty. But since my CL increased by 30% and TU increased the point, I don't see how the penalty could work for EQ but not on TU. Seems hard to tell what's happening behind the scene.

Message 7 of 23
Thomas_Thumb
Senior Contributor

Re: AAoA. What's Optimal, Good, OK, and Bad


@Anonymous wrote:

Helpful response. I gave Kudos to you.

 

I can provide a data point to show that the 1 yr time point may be a threshold for AAoA. I just got a new card reporting to the 3 Bureau agencies, which increases my credit limit by 30% but drops my AAoA from 1 yr 4 m to 11 months. As a result, my EQ score drops from 750 to 740 by 10 points. No inq reported to EQ for the recent 2 yr. Certainly, I don't know if my total score plays a rule as well. My TU at the same time increased by 5 points from 731 to 736 despite that there is a new inq reported to TU. But I think the AAoA passing the 1 yr bar plays some role for my EQ score drop. Hope this is helpful.


Generally new card => inquiry. The inquiry could be the reason for your score drop. Often an inquiry only shows up on one CRA report. Mine showed up on EQ only when I asked for a CLI on a card in 6/2014. When the lone inquiry reached one year and aged off, EQ Fico 4 score went up 13 points (796 to 809). Fico 4 scores from TU and EX (no inquiry on file) stayed the same.

 

Check your EQ or 3B report next month for a hard inquiry. Going from zero to one inquiry is significant. (FYI - going from 1 to 2 inquiries not as significant)

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 8 of 23
Revelate
Moderator Emeritus

Re: AAoA. What's Optimal, Good, OK, and Bad


@Anonymous wrote:

The latest account report is just a few days ago. There could be a penalty. But since my CL increased by 30% and TU increased the point, I don't see how the penalty could work for EQ but not on TU. Seems hard to tell what's happening behind the scene.


There's a bunch of things that FICO calculates on; to make matters worse, the algorithms at the individual bureaus are different.  End of the day a couple point swing isn't worth worrying about.




        
Message 9 of 23
Anonymous
Not applicable

Re: AAoA. What's Optimal, Good, OK, and Bad

The only INQ actually went to TU not EQ which dropped 10 points. Anyway, I will check it on the next cycle.

Message 10 of 23
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