New accounts and scoring

[Remedios]

So, for scoring purposes, is there a difference when account reaches certain number of months (3,6,12 etc) or is everything under two years considered new, and subject to a scoring penalty ? 

[Anonymous]

Nobody knows for sure.  The details of how the models work are hidden.  Some areas have been backward engineered by the folks here with fair confidence (e.g. CC utilization) but the exact details of the question you ask have not had a single proven answer.  That does not stop people from having opinions of course.  :-)

One thing that is known is that your Age of Youngest Account matters more than the individual age of each account (except in the obvious way that all the individual accounts together combine to give you your Average Age of Accounts).  I think that a lot of people guess that most FICO models conceptualize an account as "young" or not depending on whether it is less than 12 months old (or not).  That's a guess -- and is different from inquiries having no effect after a year. 

The LexisNexis models (not made by FICO, but used by the insurance industry) have much more specific and transparent reason statements, and there we know that the cutoff is 24 months.  Defining "young" to be < 24 months old, LN is interested in the percentage of All Young Accounts (closed or open) divided by All Open Accounts (regardless of age) -- and LN has a number of breakpoints for penalties.  It likes it best of course when that percentage is small, though if you look carefully you can see that it can go well over 200%.  (You could have three open accounts currently but seven young accounts, counting closed ones.)

[Anonymous]

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wrote:

So, for scoring purposes, is there a difference when account reaches certain number of months (3,6,12 etc) or is everything under two years considered new, and subject to a scoring penalty ? 

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Just a quick follow-up.  The highlighted text above suggests that you might be thinking that, if all accounts became at least two years old, then there would be no age-related scoring penalties of any kind. 

This would not be true.  Two of the biggest age-related scoring factors are Age of Oldest Account (AoOA) and Average Age of Accounts (AAoA).  A consumer gets substantial scoring benefit for having an Age of Oldest well past 10 years (could be even 15 or 20) and scoring benefit for AAoA up through 8 (possibly some benefit higher, though a score of 850 is achievable with an AAoA of 8). 

Thus if a person had six accounts that were all 25-27 months old (all accounts over 2 years) his AAoA and AoOA would only be a little over 2 years -- and there are definite scoring penalties for that.  (You can also call it "a lack of potential scoring benefit" but I think that is basically the same thing practically.)

[Remedios]

Thank you! 

[Anonymous]

I have 3 accounts that will reach 1 year of age in 3 months.  I'm curious when my AoYA reaches 1 year if my too many new accounts related reason code goes away and if so, a slight score bump goes along with it.

[Remedios]

I do not have a score yet, first account opened in October, next two in November. 

If I am understanding this correctly, age of my oldest, youngest and average will be almost  identical as long as no new accounts are added (which I have no plans of doing till the ones I have are at least a year old) 

[Anonymous]

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wrote:

I do not have a score yet, first account opened in October, next two in November. 

If I am understanding this correctly, age of my oldest, youngest and average will be almost  identical as long as no new accounts are added (which I have no plans of doing till the ones I have are at least a year old) 

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Yup, that's right.

Furthermore, if the models internally categorize accounts as "young" if they are < 12 months old, then 100% of your accounts are young now, but after you have waited till they are older, 0% of them will be young.  Moving from 100% to 0% may give you some help too (again, nobody knows exactly how the models work).

Even if you add exactly one new account after they are all 1 year old, that would still mean you'd be at 25%, which is doubtless better than where you are now.