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New card vs inquiry and lower AAoA?

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masscredit
Valued Contributor

New card vs inquiry and lower AAoA?

Some people here love app sprees so this won't be a good question for them Smiley Happy When is a new card worth more than the hit taken with an inquiry and lowered AAoA from the new account? 

 

The sting from the inquiry becomes less after a few months then it no longer hurts the score after 1 year. AAoA can take a longer amount of time to recover. I don't think that matters as much if you have a long AAoA. A new account is just a small blimp if the average age is 10 years but it can be a big hit if your average age is only 2 years. 

 

What do you think? 

Pre-Credit Rebuild Scores Pre-DC (3/24/22) - EQ - 524 / TU - 519 / EX - 495

Current Scores - EQ - 687 / TU - 663/ EX - 677

SDFCU Secured - $5000 / TD Bank - $5000 / Mercury - $5000 / Capital One Savor One- $5000 / Capital One QuickSiver - $4500 / Ally Master Card - $2800/ Walmart Mastercard - $2250

Andrews FCU SSL $1500
Message 1 of 19
18 REPLIES 18
Anonymous
Not applicable

Re: New card vs inquiry and lower AAoA?


@masscredit wrote:

Some people here love app sprees so this won't be a good question for them Smiley Happy When is a new card worth more than the hit taken with an inquiry and lowered AAoA from the new account? 

 

The sting from the inquiry becomes less after a few months then it no longer hurts the score after 1 year. AAoA can take a longer amount of time to recover. I don't think that matters as much if you have a long AAoA. A new account is just a small blimp if the average age is 10 years but it can be a big hit if your average age is only 2 years. 

 

What do you think? 


Question is-what are you thinking of applying for?  Your scores are decent, so your chances for approval are good.  I have 1 collection still on my report and AAo1 1.7 years, so I am not applying for anything right now, just playing the CLI game.  I want my secured cards to age and the unsecured cards maybe an increase with Barclays at 6th statement and Amex 1 year.  Sometimes think about an unsecured Cap 1 card, but know my profile won't get stronger till the collection falls off.  If I knew I would be in the $5k category, then I might consider it, but otherwise, it probably wouldn't be worth it. 

Message 2 of 19
12njoy
Super Contributor

Re: New card vs inquiry and lower AAoA?


@masscredit wrote:

Some people here love app sprees so this won't be a good question for them Smiley Happy When is a new card worth more than the hit taken with an inquiry and lowered AAoA from the new account? 

 

The sting from the inquiry becomes less after a few months then it no longer hurts the score after 1 year. AAoA can take a longer amount of time to recover. I don't think that matters as much if you have a long AAoA. A new account is just a small blimp if the average age is 10 years but it can be a big hit if your average age is only 2 years. 

 

What do you think? 


You are correct that the ding will hurt much more if your AAoA is something like two years but this would take many applications/approvals and not just one approval.  For me, my AAoA was never high to begin with and now is 1.2 - 1.8 years depending upon CRA.  

(Formerly known as: Credit is my hobby/TCL objective)
___________ 12Njoy
FICO - EX 810; EQ 797; TU 804 I'm climbing back to 800+
Message 3 of 19
masscredit
Valued Contributor

Re: New card vs inquiry and lower AAoA?

I'm not thinking about applying for new credit. It was pretty much and in general question. I considered going for a new card or two in the past but decided against that (advice from here helped). I currently have 8 cards that total to $52,500. I should be able to get another $2K-$4K in CLIs from Cap 1 before the end of the year (2 cards). I'll combine them after that so I'll have one card with a limit of at least $20K then continue to let them and my other cards grow.  I might, just might consider applying for one more card after. It would have to be something that I'd feel very confident in getting approved for (Chase, AMEX and Discover were included in my BK) and I'd also hope that the starting limit would follow my other cards then. That would mean something in the $10K - $20K range. 

 

 

Pre-Credit Rebuild Scores Pre-DC (3/24/22) - EQ - 524 / TU - 519 / EX - 495

Current Scores - EQ - 687 / TU - 663/ EX - 677

SDFCU Secured - $5000 / TD Bank - $5000 / Mercury - $5000 / Capital One Savor One- $5000 / Capital One QuickSiver - $4500 / Ally Master Card - $2800/ Walmart Mastercard - $2250

Andrews FCU SSL $1500
Message 4 of 19
Thomas_Thumb
Senior Contributor

Re: New card vs inquiry and lower AAoA?


@masscredit wrote:

Some people here love app sprees so this won't be a good question for them Smiley Happy When is a new card worth more than the hit taken with an inquiry and lowered AAoA from the new account? 

 

The sting from the inquiry becomes less after a few months then it no longer hurts the score after 1 year. AAoA can take a longer amount of time to recover. I don't think that matters as much if you have a long AAoA. A new account is just a small blimp if the average age is 10 years but it can be a big hit if your average age is only 2 years. 

 

What do you think? 


A better question is: why do you need another card?

 

If you want a higher aggregate CL, perhaps continuing to increase CLs on cards is the way to go. Generally, an aggregate CL between 50% and 100% of yearly income provides sufficient flexibility in balance reporting at a low UT% without micromanaging payments while avoiding potential for severe over exposure on debt.

 

My bias is fewer is better and easier to manage. I consider 5 to 8 cards as an optimal QTY all things considered. However, others consider 10 to be a minimum.

 

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 5 of 19
Anonymous
Not applicable

Re: New card vs inquiry and lower AAoA?


@masscredit wrote:

Some people here love app sprees so this won't be a good question for them Smiley Happy When is a new card worth more than the hit taken with an inquiry and lowered AAoA from the new account? 

 

The sting from the inquiry becomes less after a few months then it no longer hurts the score after 1 year. AAoA can take a longer amount of time to recover. I don't think that matters as much if you have a long AAoA. A new account is just a small blimp if the average age is 10 years but it can be a big hit if your average age is only 2 years. 

 

What do you think? 


The key word is "worth."  The new card might have, purely in terms of itself, a huge benefit to the person, both long term and short term.  For example, suppose the person has no general cash back card -- and there's a sign-up bonus offer for the Citi Double Cash going around for $200.  That no annual fee card will benefit him a lot in the years to come as well as the short term (the sign up bonus).  So it is worth a lot.  Some other card might be worth very little, because it already gives the person benefits he mostly already has. 

 

So I am going to assume that you are ignoring the highly subjective question of how much a particular card could be worth to a particular person.

 

Instead, I'll assume you are asking what the advantage is to your credit score to add a new card vs. not adding a new card.  Here, happily, something much more definite can be said.

 

If a person has a small number of cards (1-2) there's a big advantage to adding a card.  According to the tribal lore of this forum, you need at least three cards to drive your score to a very high level.  But you really don't need more than that.  Many people have reported very high scores with only three cards.  I had an 844 before I finally got around to adding a fourth card.

 

(Note to the OP: you have 8 cards now and may be getting rid of 1, bringing your total to 7.  Seven cards is plenty high enough, though that doesn't mean people who just enjoy the pleasure of having 10 or 15 cards are doing something wrong.  It's just that, aside from the subjective pleasure of having lots of cards, you don't need them.)

 

There's also some advantage in the long LONG run to adding a few cards for a person who only has 2-4.,  (We are talking several years in the future.)  It won't help your score (as mentioned earlier, three cards is enough to drive you to the 840s if you have other good stuff in your profile.)  But it helps give you extra accounts -- and this is helpful down the road in terms of absorbing the shock of adding new account to your profile (an auto loan for a new car, say.)  . 

 

Compare two guys (Bob and Fred).  Bob's profile consists of two 12 year old cards.  Fred's profile consists of five 12-year old cards.  Both have an AAoA of 12..  Both guys add an auto loan.  Bob's AAoA goes from 12 to 8 (minus four years).  Fred's foes from 12 to 10 (minus only two years). 

 

Now here you have to be careful: in the short term adding some extra cards (to create a thick profile) will not protect your AAoA, but will instead harm your AAoA.  So it is a nice strategy when a person has an already low AAoA and he also has no major credit needs in the next few years (e.g. no car or home purchase).

 

Aside from these two benefits (at least three cards to drive a high score and some extra cards to help absorb age impact of new accounts) there's one other advantage to adding a card.  You alluded to it a bit, which is expanding your total credit limit.  That is an advantage of a sort, but I am going to go out on a limb and suggest that, in my opinion, that's a really bad reason to add a card.   Typically when people are thinking this way, it's because they are having trouble with their CC utilization.  If a person is having trouble there, then the last thing they need to is to expand their ability to go still further into high-interest CC debt.  A college student with only one card and a total credit limit of $300 can spend as much as he wants and still have a utilization of 1-5%.  If a person is having trouble with their CC utilization, the solution is to stop, draw up a budget, and sharply reduce his spending.

 

So in summary I think there's a big advantage to adding cards when you have a small number.  (Reasons above.)  If you have more than 3-5, there may be a financial advantage if the card is going to give you some special and substantial benefit that you don't have now.  (I added a couple no-annual fee Hilton cards to get the 135,000 point sign up bonus.)  Aside from that there's no benefit to your score or profile from adding a new card, and potential headache from having another account to manage.

 

 

Message 6 of 19
getrdone1
Valued Member

Re: New card vs inquiry and lower AAoA?

it seems as though everyone here is spot on as far as what happens to accounts and AAofA...one other thing to consider is that even though you may have 3 or 4 credit cards, they may not be around in the future..banks do fold.. credit cards get issued and sometimes close out and they quit reporting.. when credit cards change hands or servicing banks, sometimes they fall off reports very quickly..there are a lot of unknowns and too much credit with one bank or just a few banks is not all that good in my opinion...i had an old dillards card that was gone from reports prematurely when wells fargo took over from syncrony..several old wamu accounts closed by chase when they took over wamu.. as well as cld's to nothing($340) from capital one as they took over HSBC..my list can go on from years of experience of  what can and does happen...i prefer to have more banking relationships and less exposure to one particular favorite one..even with a 38.9 years oldest account (AMEX)acquired in december 2014, thanks to backdating, even new accounts still cost me about 4-5 months AAofA..at one time i was over 10 years on AAofA and now i am down to 6.2...BUT..and this is a big but.. i now have some good lenders, and a little more security in knowing i have some available credit when i need it...what is an 850 or 830 score if i don't do anything with it..at 850 it can't grow or get me any higher...more accounts aged over time and selectively gotten will be more beneficial to me in the long run...lets face it... i have been balance chased!!! loans called in due and payable immediately!!! fraud alerts perpetrated on my credit profile!! and six properties lost over stupid balloon mortgages that lenders are allowed to give to unsuspecting borrowers...and others you wouldn't believe...through no fault of my own....so!!!!! give me those sign up bonuses and give me those precious rewards..cuz they may be gone tomorrow and they will start charging us an annual fee again to carry their cards and a high interest rate to boot...

DINERS 30K...AMEX BCE 30K....BBVA AMEX 20K...NASA 20K...PENFED CASH 10K...ALLIANT REW 20K...PNC POINTS 17.5K...PENFED PLOC 15K...PENFED PLATINUM REW 40K...FIFTH THIRD 15K...BARCLAY REW 11.6K...CAP ONE VENTURE 13K...SALLIE MAE 12K...CHASE FREEDOM 7.5K...DISCOVER 35.5K...QUICKSILVER 11K...QUICKSILVER 9.4K...NATIONWIDE 10.8K...SPORTSMANS GUIDE 6.8K...EQ-850, TU-850, EX-849...BK OCT 2005...NO NEW CARDS IN OVER 2 YEARS!!!
Message 7 of 19
Kidcat
Established Contributor

Re: New card vs inquiry and lower AAoA?


@Anonymous wrote:

@masscredit wrote:

Some people here love app sprees so this won't be a good question for them Smiley Happy When is a new card worth more than the hit taken with an inquiry and lowered AAoA from the new account? 

 

The sting from the inquiry becomes less after a few months then it no longer hurts the score after 1 year. AAoA can take a longer amount of time to recover. I don't think that matters as much if you have a long AAoA. A new account is just a small blimp if the average age is 10 years but it can be a big hit if your average age is only 2 years. 

 

What do you think? 


The key word is "worth."  The new card might have, purely in terms of itself, a huge benefit to the person, both long term and short term.  For example, suppose the person has no general cash back card -- and there's a sign-up bonus offer for the Citi Double Cash going around for $200.  That no annual fee card will benefit him a lot in the years to come as well as the short term (the sign up bonus).  So it is worth a lot.  Some other card might be worth very little, because it already gives the person benefits he mostly already has. 

 

So I am going to assume that you are ignoring the highly subjective question of how much a particular card could be worth to a particular person.

 

Instead, I'll assume you are asking what the advantage is to your credit score to add a new card vs. not adding a new card.  Here, happily, something much more definite can be said.

 

If a person has a small number of cards (1-2) there's a big advantage to adding a card.  According to the tribal lore of this forum, you need at least three cards to drive your score to a very high level.  But you really don't need more than that.  Many people have reported very high scores with only three cards.  I had an 844 before I finally got around to adding a fourth card.

 

(Note to the OP: you have 8 cards now and may be getting rid of 1, bringing your total to 7.  Seven cards is plenty high enough, though that doesn't mean people who just enjoy the pleasure of having 10 or 15 cards are doing something wrong.  It's just that, aside from the subjective pleasure of having lots of cards, you don't need them.)

 

There's also some advantage in the long LONG run to adding a few cards for a person who only has 2-4.,  (We are talking several years in the future.)  It won't help your score (as mentioned earlier, three cards is enough to drive you to the 840s if you have other good stuff in your profile.)  But it helps give you extra accounts -- and this is helpful down the road in terms of absorbing the shock of adding new account to your profile (an auto loan for a new car, say.)  . 

 

Compare two guys (Bob and Fred).  Bob's profile consists of two 12 year old cards.  Fred's profile consists of five 12-year old cards.  Both have an AAoA of 12..  Both guys add an auto loan.  Bob's AAoA goes from 12 to 8 (minus four years).  Fred's foes from 12 to 10 (minus only two years). 

 

Now here you have to be careful: in the short term adding some extra cards (to create a thick profile) will not protect your AAoA, but will instead harm your AAoA.  So it is a nice strategy when a person has an already low AAoA and he also has no major credit needs in the next few years (e.g. no car or home purchase).

 

Aside from these two benefits (at least three cards to drive a high score and some extra cards to help absorb age impact of new accounts) there's one other advantage to adding a card.  You alluded to it a bit, which is expanding your total credit limit.  That is an advantage of a sort, but I am going to go out on a limb and suggest that, in my opinion, that's a really bad reason to add a card.   Typically when people are thinking this way, it's because they are having trouble with their CC utilization.  If a person is having trouble there, then the last thing they need to is to expand their ability to go still further into high-interest CC debt.  A college student with only one card and a total credit limit of $300 can spend as much as he wants and still have a utilization of 1-5%.  If a person is having trouble with their CC utilization, the solution is to stop, draw up a budget, and sharply reduce his spending.

 

So in summary I think there's a big advantage to adding cards when you have a small number.  (Reasons above.)  If you have more than 3-5, there may be a financial advantage if the card is going to give you some special and substantial benefit that you don't have now.  (I added a couple no-annual fee Hilton cards to get the 135,000 point sign up bonus.)  Aside from that there's no benefit to your score or profile from adding a new card, and potential headache from having another account to manage.

 

 


This is an interesting perspective.  I like my utilization to "hurt" if you will.  It is a swift reminder to not go into debt.  With total credit limits of say $100k and 6% util, that still means you have $6k reporting at any given time (this is just an example)  and unless you have $6k liquid, where you could pay everything off right that second, you are taking advantage of credit card float, and this could become a slippery slope.  

 

So if my utilization creeps up, I pay everything off.  So far I have been adding cards, and closing others.  Even with doing that I have almost $100k open lines, and that not even 50% of my income.  I cannot even fathom having 100% of my income in open credit lines.  

 

I have old student loans which are really helping my AAOA.  Adding new cards can serve a purpose, but utilization padding is tricky...at least for meSmiley Happy  I've had great credit and the worst (BK).  I know how fast the tide can change.




Last app 09/21/2021. Gardening Goal Oct 2023
Message 8 of 19
Anonymous
Not applicable

Re: New card vs inquiry and lower AAoA?

Very thoughtful, Sladyesq. 

 

I think that when people use utilization % as a way of tracking the safety and wisdom of their debt and spending levels (my utilization is 5% so I must be behaving really responsibly) that's a big mistake, for the very reasons you cite.  Basically it's really not hard to get a gigantic total credit limit.  If you keep applying for enough cards and engaging in various well known tricks to create an artificially high credit score, you can eventually get a CL of 200k or perhaps much more, even with a comparatively low annual income.

 

Even the rule of "paying in full" doesn't really (in itself) assess whether a person's monthly spending is wise, since it doesn't take into account how much the person is managing to save each month (toward retirement, toward a house DP, toward a rainy day fund, etc.).

 

So my feeling is that utilization is something a person should largely ignore as a basis for deciding how to spend their money, since U% and CLs and FICO scores in general are so easily gamed.  Rather, the best single metric (in my opinion) is looking at how much of your paycheck you are saving.  It should be a whole lot.  :-)

Message 9 of 19
Thomas_Thumb
Senior Contributor

Re: New card vs inquiry and lower AAoA?


@Anonymous wrote:

Very thoughtful, Sladyesq. 

 

I think that when people use utilization % as a way of tracking the safety and wisdom of their debt and spending levels (my utilization is 5% so I must be behaving really responsibly) that's a big mistake, for the very reasons you cite.  Basically it's really not hard to get a gigantic total credit limit.  If you keep applying for enough cards and engaging in various well known tricks to create an artificially high credit score, you can eventually get a CL of 200k or perhaps much more, even with a comparatively low annual income.

 

Even the rule of "paying in full" doesn't really (in itself) assess whether a person's monthly spending is wise, since it doesn't take into account how much the person is managing to save each month (toward retirement, toward a house DP, toward a rainy day fund, etc.).

 

So my feeling is that utilization is something a person should largely ignore as a basis for deciding how to spend their money, since U% and CLs and FICO scores in general are so easily gamed.  Rather, the best single metric (in my opinion) is looking at how much of your paycheck you are saving.  It should be a whole lot.  :-)


CGID - Controlling expenses to provide saving is paramount. This can and should be accomplished regardless of aggregate CL and UT%.
The suggested CL range of 50% to 100% is predicated on aggregate UT% being maintained under 10% without "balance pay down tactics" before statements close. As income rises beyond middle income, reducing aggregate CL from 50% to 20% of income is advised. Really at a $5M income, do you really need an aggregate CL in excess of $1M?
Also, as income falls below say, $50k, CLs in excess of 50% income represent increased risk for ability to pay. Again, throttling back aggregate CL would be prudent. These suggestions are also predicated on allowing full balances to report and maintaining aggregate UT under 9% [preferrably 6%].
Example: combined CL = 60% and monthly UT = 5% => 3% of yearly income in CC expenses per month.
I prefer not to pre-pay charges and to maintain aggregate UT between 1% and 3% month to month. A combined CL of around 80% works well for my situation.
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 10 of 19
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