Impact of aging accounts?

[irunfromcredit]

Had a question about aging accounts and the kind of impact they have my scores.  So my scores are between 730-750 across all three bureaus.  

Factors impacting my scores:

**The balance on my installment loans is high-The balance on my student loans are pretty high, paying them off in large chunks. 

**Too many inquires in the last 12 months-Opened up quite a few accounts in the last 12 months. 

**Age of my accounts are fairly new...my AAOA is 2.7 years....went on a spree about 5 months ago and picked up about 6 cards back then.

So I guess my question is, at what point would my accounts not be considered so new?  6 months? one year?  two years?   

I want to get my scores in the 770 range and I know that as I pay my student loans down I should see an increase, as well as my inquiries falling of.  But just not sure about aging accounts.....will I see some increase when my new account hit 6 months old?  Or one year?

Oh, I should add that my overall utilization hovers between 2-3%. I do have two cards reporting almost 30% utilization only because they are at 0% APR for 12 months.  I'm sure that is impacting my score as well...but really want to know about impact on scores with aging accounts.

Thanks so much!!  

[SouthJamaica]

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@irunfromcredit wrote:

Had a question about aging accounts and the kind of impact they have my scores.  So my scores are between 730-750 across all three bureaus.  

Factors impacting my scores:

**The balance on my installment loans is high-The balance on my student loans are pretty high, paying them off in large chunks. 

**Too many inquires in the last 12 months-Opened up quite a few accounts in the last 12 months. 

**Age of my accounts are fairly new...my AAOA is 2.7 years....went on a spree about 5 months ago and picked up about 6 cards back then.

So I guess my question is, at what point would my accounts not be considered so new?  6 months? one year?  two years?   

I want to get my scores in the 770 range and I know that as I pay my student loans down I should see an increase, as well as my inquiries falling of.  But just not sure about aging accounts.....will I see some increase when my new account hit 6 months old?  Or one year?

No one knows the answer to that, but you should realize that there are at least 4 different factors involved in that question:

1. recent inquiries

2. age of oldest account

3. age of newest account

4. average age of accounts

If you stop applying for things  you'll pick up a lot of points

You'll probably be over 800 in a year

Oh, I should add that my overall utilization hovers between 2-3%. I do have two cards reporting almost 30% utilization

30% is a benchmark on individual card utilization, so you'll pick up points by bringing them down to 29%

You'll pick up even more points by bringing them down to 9%

only because they are at 0% APR for 12 months.

FICO doesn't give you points for saving money

 I'm sure that is impacting my score as well...but really want to know about impact on scores with aging accounts.

Thanks so much!!  

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[irunfromcredit]

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@SouthJamaica wrote:

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@irunfromcredit wrote:

Had a question about aging accounts and the kind of impact they have my scores.  So my scores are between 730-750 across all three bureaus.  

Factors impacting my scores:

**The balance on my installment loans is high-The balance on my student loans are pretty high, paying them off in large chunks. 

**Too many inquires in the last 12 months-Opened up quite a few accounts in the last 12 months. 

**Age of my accounts are fairly new...my AAOA is 2.7 years....went on a spree about 5 months ago and picked up about 6 cards back then.

So I guess my question is, at what point would my accounts not be considered so new?  6 months? one year?  two years?   

I want to get my scores in the 770 range and I know that as I pay my student loans down I should see an increase, as well as my inquiries falling of.  But just not sure about aging accounts.....will I see some increase when my new account hit 6 months old?  Or one year?

No one knows the answer to that, but you should realize that there are at least 4 different factors involved in that question:

1. recent inquiries

2. age of oldest account

3. age of newest account

4. average age of accounts

If you stop applying for things  you'll pick up a lot of points

You'll probably be over 800 in a year

Oh, I should add that my overall utilization hovers between 2-3%. I do have two cards reporting almost 30% utilization

30% is a benchmark on individual card utilization, so you'll pick up points by bringing them down to 29%

You'll pick up even more points by bringing them down to 9%

only because they are at 0% APR for 12 months.

FICO doesn't give you points for saving money

 I'm sure that is impacting my score as well...but really want to know about impact on scores with aging accounts.

Thanks so much!!  

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Thanks so much for your input. I realize that there are more factors that impact a score, but those were the three specific factors that MyFico gave me on my 3B report.  

I guess I will wait and see what happens over the course of 6 months with my scores.  I have one card that is reporting 25% of the balance (0% APR).  Anticipating have that one paid off by December.  Yes I realize that FICO doesn't give points for saving, but I chose to save money over the higher score for now.

I am just looking at the next 6-12 months how aging an accounts wil impact my scores...I guess it will be wait and see...

[Revelate]

It's hard to pin down unfortunately.

I did have pretty conclusive evidence during my mortgage process and repeated pulls on a static file that my latest tradeline aging over a year made absolutely no difference to my score.  Zero zip, nada, and while I suspect that would translate to any profile it's hard to say with how FICO works.

I wouldn't really worry about it as you can't accelerate time: your plan to optimize your installment debt and stop applying for accounts will get you to around 770 from where you're at and maybe higher: a fully optimized file can hit 800 with 2 years of AAOA, and I couldn't find a breakpoint at 3 years AAOA personally as I moved back and forth across it but my file is unfortunately busy so it's hard to state emphatically as the data points aren't as clean as I'd like.

[Anonymous]

One reason it is (as Revelate says) hard to pin down, is that the exact method a FICO model uses for factoring in "new accounts" is not explicit.  The closest I have seen is this language:

"Your FICO® Scores look at how many new accounts you have by type of account. They also may look at how many of your accounts are new accounts."  Iemphasis mine)

http://www.myfico.com/CreditEducation/New-Credit.aspx

The language suggests that they do have some kind of internal definition that classifies accounts in a binary on-off fashion, as either "new" or not new.  Furthermore, and more importantly, it suggests that they use this definition in part of their algorithm by considering what percentage of your total accounts are new. 

They don't use the word "percentage" there, but we know that they do something like that for the number of cards showing a balance.   That is, the simple raw number matters much less than the number compared to your total number of cards.  The conjecture is that this is assessed as a percentage. 

Thus, a person with 17 open credit cards could have 1, 2, 3, or 4 cards showing a balance and he would still have < 25% of his cards showing a balance.  (And thus almost certainly no penalty.)  Whereas a person with four credit cards total who had four cards showing a balance would have 100% showing a balance and would receive the full penalty.

If this percentage-implementation is one way FICO thinks about "new accounts" then it wouldn't be strange for a particular account to cross from "new" to "not-new" and yet have that have zero impact on that person's score.

Curiously other scoring systems have very explicit reason codes for this "percentage" approach to new accounts.  For example, the Lexis Nexis insurance score has a whole family of these codes, where "new" is defined as < 24 months.

3226   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 11.12% to 16.67%
3227   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 16.68% to 42.86%
3228   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 42.87% to 46.67%
3229   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 46.68% to 66.67%
3230   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 66.68% to 85.71%
3231   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 85.72% to 125.00%
3232   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 125.01% to 150.00%
3233   % of Accts Opnd Last 24 Mos in Rltnshp to Total Open Accts is 150.01% or more

FICO appears to be more secretive but their language in the Learn About Scores section suggests they might do something similar.

[Anonymous]

+1
The above two posters

The OP correctly stated he/she will emphasis saving over score chasing and they should keep THAT mantra intact and GO LIVE!

As wonderfully illustrated above, some of this crap gets to be Chinese math, at a certain point so why bother the microscopic details...that one can't very well control.

Aging, will happen as accounts 'age' ones time and effort are better spent on those items more readily in one's control and let the other chips fall as they fall.

Especially when one has a score good enough to garner the best available terms as it is
SJ correctly predicted just staying on course will likely generate a near/above 800 score within short order
And the OPs goal is saving money along the way...there isn't much else to do but allow time and continued proper maintenance work in the profiles favor.

Look at 'age' the same way one has to see it when gauging 'how long' is long enough before a new friend or lover isn't 'new' anymore....it can be way too subjective and trying to figure it out isn't worth the trouble, just enjoy the ride...you seem to be doing very well so far.

[Stryder]

I agree with what Gemini101 said. I have been studying AAoA quite a bit here lately, because I think it's going to affect me more, because my scores aren't as high. I have been impoverished with low credit for 7 years now, and I am finally (since I've been on this board) getting to the point where I can get credit. I dont want a to of cards, but enough to handle my cash flow and emergency's. I have 5 cards and want to add a 6th...a BT card.

I really like what Credit Guy posted......it gave me a chance to look at what adding new accounts does to your credit base. I think AAoA only counts 10%?, but overall if you have lower scores it counts heavier in that bucket.

Right now I have EQ 658 TU 700 EX 679

Oldest 10.2 yrs AAoA 2.8

2 car loans 2yrs and 3 mos

BoA- 4.8yrs, Synch 1yr, Cap1 .9 yr, Amex and CSP 2 mos

Thats 7 open accounts and 5  <2yrs + 71.5%

if I open another BT card, that would move it to 75% accounts being new

Doesn't look like its going to be much difference. I calculate it will be 1.3 yrs before my AAoA is over 4 years. SO I would like to go ahead and get what I want/need and let the start aging now... If I wait until next year, I lose a year of aging.

As a side note, my last baddie fell off EX (Its still on EQ and TU)...my score went up to 739 last Thursday!!!! 

So I think as thinks age while I garden, I will be fine and I will have what I want.

Keep in mind, I have only been doing this a few months, so wiser thoughts are welcome before I pursue the BT card (SDFCU that cks EX...got shot down with a 671 2 weeks ago) if my thought process is off..

oh yeah...INQ... EQ-4, TU 9, EX6

[Anonymous]

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@Stryder wrote:
... I think AAoA only counts 10%?

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Close, but not quite.  AAoA belongs to the "Length of Accounts" category, which according to FICO accounts for 15% of your score and includes these factors (I have edited the language very slightly for clarity):

    age of your oldest account,
    the age of your newest account
    the average age of all your accounts
    how long it has been since you used certain accounts

http://www.myfico.com/credit-education/whats-in-your-credit-score/

So AAoA is one of four factors from this category.  Age of your oldest account is important because it is used (along with thickness of file and age of newest account) in determining what scorecard you are assigned to).  Given that AAoA is one factor of four from a category that is 15%, it's hard to know for sure how much of your score AAoA alone typically affects.  But less than 10% is a fair guess though.

(Side note: your profile thickness is fine and so is your age of oldest account.  Since EX is now derog-free you will be in a very nice scorecard for EX.  Do you think there might be a way to become derog free on TU and EQ as well?  BTW, if a profile only has a few 30-day lates on it and they are well in the past, that is considered a "clean" profile for scorecard assignment purposes.)

It's worth noting that this idea of FICO defining an account as new vs. not also affects another scoring category (New Credit = 10%) which we have been talking about in this thread.

I like your idea of opening one last credit card and then gardening for a couple years.  I note that your are choosing the card for its "balance transfer" feature.  Sounds like you have a fair amount of CC debt?  If so, the best thing you can do for yourself is pay ALL of your CC debt off.  That will help your score and your general financial health a huge amount.  Once all cards get paid to zero, you can continue using a couple cards as appropriate for essential purchases.

[Stryder]

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@Anonymous wrote:

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@Stryder wrote:
... I think AAoA only counts 10%?

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Close, but not quite.  AAoA belongs to the "Length of Accounts" category, which according to FICO accounts for 15% of your score and includes these factors (I have edited the language very slightly for clarity):

    age of your oldest account,
    the age of your newest account
    the average age of all your accounts
    how long it has been since you used certain accounts

http://www.myfico.com/credit-education/whats-in-your-credit-score/

So AAoA is one of four factors from this category.  Age of your oldest account is important because it is used (along with thickness of file and age of newest account) in determining what scorecard you are assigned to).  Given that AAoA is one factor of four from a category that is 15%, it's hard to know for sure how much of your score AAoA alone typically affects.  But less than 10% is a fair guess though.

(Side note: your profile thickness is fine and so is your age of oldest account.  Since EX is now derog-free you will be in a very nice scorecard for EX.  Do you think there might be a way to become derog free on TU and EQ as well?  BTW, if a profile only has a few 30-day lates on it and they are well in the past, that is considered a "clean" profile for scorecard assignment purposes.) My derog is on all 3B and is scheduled to be removed in November, EX shocked me by doing it early, so I have to wait until next month and see what happens with the others. I am expecting to be derog free by the end of this year. I have over 6 years perfect payments...so I'll be clean and just need to let things age

It's worth noting that this idea of FICO defining an account as new vs. not also affects another scoring category (New Credit = 10%) which we have been talking about in this thread. I did not understand that....thanks

I like your idea of opening one last credit card and then gardening for a couple years.  I note that your are choosing the card for its "balance transfer" feature.  Sounds like you have a fair amount of CC debt?  If so, the best thing you can do for yourself is pay ALL of your CC debt off.  That will help your score and your general financial health a huge amount.  Once all cards get paid to zero, you can continue using a couple cards as appropriate for essential purchases. I don't really have much debt at all...around $850 left on the SYNC devil card. I want the BT for emergency's or if i want to let $3k to ride for a while I will have a means of doing it with out having a high interest rate and still have a livable util. My tcl right now is $16k, will go to $20k when I do my 3x on the BCE next month...total util right now is 6%, only one card reporting.

Thanks so much Credit guy...you are always willing to share!

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[Anonymous]

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Delighted to hear that all your derogs will be off your reports by January 1.  Woo-hoo!

As far as CC usage in the next couple years (while you are gardneing):

At the moment you are doing the all cards at zero except one (AZEO) approach.  That's great.  But it is really only necessary in the run up to an application of new credit, where you want every conceivable extra point.  (E.g. applying for this sixth card.). 

But during the long stretch while you are gardening, which by definition means not applying for any credit, then you can forget about AZEO if you want.  It will be easier to just use your cards as happens naturally, allow them to report positive balances to the credit bureas, and then allow autopay to just pay the balances in full.  That's what a lot of us do..  It's a simple way of establishing a clear pattern of use and payment-in-full, which lenders like to see, all with no headache to you.  Of course, when you next have to apply for credit again, or if you decide you want to see in a year's time the very top of your scoring possibility, you can always switch back to AZEO for a month.

It sounds like I wrote something you didn't fully understand in my last post.  I wrote:

"... this idea of FICO defining an account as new vs. not also affects another scoring category (New Credit = 10%) which we have been talking about in this thread."

I was just pointing out that the concept of "account age", especially the presence of very young accounts, affects factors from two different scoring categories, namely Length of Credit History (15%) and New Credit (10%).  Thus, for example, I personally have opened several new credit cards in the last 23 months (most of the new cards were in the last 11 months and two of them were in the last three months).  Because I have so many new accounts, that is affecting my AAoA (a factor from Length of Credit History) and Percentage of Total Accounts That Are New (from the New Credit category) as well as the Age of Youngest Account (which is in both categories and which is used in scorecard assignment).

I will probably be taking a leaf from your playbook and going into the Garden for a year or more.  If I can stay there long enough (18 months) I will be in good shape when I emerge to snap up Chase promotional offers I am currently blocked from.    The thing that has made me decide to do that in particular was my score dipping down into the 790s las week.  I am so used to being in the 810-835 range that crossing back into the 700s was a bit of a wake up call.  Plus it's possible I might want to buy a house in the late summer so I really should not be applying for cards just to make the underwriter happy.

Sounds like you are making a lot of decisions that are right for you.  With respect to the issue of emergencies, I would tend to address that first by building up a savings account with several thousand dollars in it.  There are accounts out there that offer 5% on the first $5000.  Your CC plan is fine too, but for me it is a red flag anytime a person wants to use CC's for more than a month to cover any purchases.  It tends to signal living paycheck to paycheck rather than saving a huge chunk of your paycheck every month towards your cash savings, your retirement funds, your car or house downpayment funds, etc.  That's just a thought, but I am sure you'll figure out what is best.