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AAoA and other effects on score questions....

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Anonymous
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AAoA and other effects on score questions....

Hi All,

 

I need some serious insight.  Long story short, I had a credit score recovery and went on a small app spree.  My thinking was that I needed additional credit in order to improve my score and somehow improve my financial situation long term.

 

Unfortunately, I believe I went about things the wrong way.  My score has rebounded to a very good place and I should have immediately examined options that were available to me to refi my underwater mortage.  I previously thought that it was a lost cause because the lender would not modify, and  I do not qualify for any existing financial programs.  Knowing that I was underwater, I didn't think it was possible to refinance because I am so far underwater that it would require substantial cash to pay down the principal to get under the maximum 95% LTV required to qualify for the refi.

 

After seeing how easily I was extended credit for the cards I applied for, I started looking into obtaining personal loan(s) to reduce the principal mortgage balance to qualify for the refi as I explained above.  My current mortgage rate is at nearly 9% and although the interest rate on the personal loans will approach 10% depending on where I secure the loans from I will make out huge if I can refinance my mortgage down to the 4% neighborhood and pay off all the personal loans in their 5-7 year time frame.

 

I spoke with a mortgage specialist began the process.  They pulled my score and told me that score wise and income wise I am approved.  I was advised that I should not app for any additional credit because the current score that they pulled was 801 and that I would be hurt if it dropped beneath a certain range (I think it was 760).  I was also advised that in order to qualify for the mortgage I could not be using "borrowed" funds (i.e. the personal loans) as part of my closing.  This additional step means that I will be required to take the personal loans and apply them directly to the principal balance (as I initially intended) but that I must wait for the new balance to report to the CBs so that the mortgage company can see the LTV% from the balance reported by the CB rather than me bringing $50k cash to closing to accomplish the same thing.

 

During the app spree I was recently approved for 6 cards, (2) personal loans (to pay down the existing underwater mortgage amount), and 1 vehicle lease.  What I don't think the mortgage specialist understood was that as each of those TLs start to show up on my CR my score will slowly start to take a negative hits

 

but my questions are....

 

1) how hard will these new lines beat up my score?

 

 

2) what factors will cause the greatest hit?  Current AAoA is 9 years, but not sure how all the new tradelines will effect AAoA

 

3) Due to the fact that I must take possession of the personal loan funds and apply them directly to the outstanding mortgage balance, I have to assume the personal loans will begin to show up in my CR.  I am not concerned about how the PL lines will hurt my DTI, I am concerned about how a brand new PL TL with an outstanding balance of $25k will negatively effect my score?

 

4) If the AAoA will be taking a significant hit, I am considering closing some credit card of TLs that I opened less than 30 days ago so they possibly don't report.  I recently opened (2) capital ones, (1) discover, (1) penfed promise, (1) Amex BCP, and (1) Sallie Mae MC.  If I close any of these TLs while they are in good standing and $0 balance will any of these lenders hold a grudge against me and possibly not extend credit to me in the future.

 

Thanks

Message 1 of 3
2 REPLIES 2
takeshi74
Senior Contributor

Re: AAoA and other effects on score questions....

Closing accounts will not improve your AAoA.  The damage is done.  If you were approved the account will report.

 

AAoA is just an average (add up the amounts and divide by the number of amounts).  You can manually calculate.  There are also online calculators and you can also use Excel and its date formulas if you don't want to calculate manaully.

Message 2 of 3
taxi818
Super Contributor

Re: AAoA and other effects on score questions....


@takeshi74 wrote:

Closing accounts will not improve your AAoA.  The damage is done.  If you were approved the account will report.

 

AAoA is just an average (add up the amounts and divide by the number of amounts).  You can manually calculate.  There are also online calculators and you can also use Excel and its date formulas if you don't want to calculate manaully.


Agree. its done. only time can help. Im learning that the hard way. just broke 1 year AAoA today. If i had not been so app happy the last 2 years who knows where my score would be right now. Just take it ez with your current cards and month after month your AAoA will recover. knowing how important it is not to over all score. that 15% affect is huge.

Message 3 of 3
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