Should rolling/refinancing an installment loan affect AAOA/FICO score?

[Lucid08]

Hi all.

During this past christmas season I refinanced an installment loan(signature loan) that had a balance of less than 80.00. The amount that was owed was rolled into a new loan with the same repayment terms as the original loan(12 months). Today I got a Scorewatch alert that showed the original loan as being payed in full, with the origination date being exactly 1 year ago(I got a christmas loan in december of 2007). The Scorewatch alert also shows the origination date of the newly refinanced loan as dec of 2008.

I know my AAOA should have suffered from this, but according to my scorewatch report my FICO score stayed exactly the same. This has me baffled a bit because I was expecting a small hit due to the new account showing on my CR, along with the hard pull the company did prior to refinancing the loan. My experience here on this forum has shown that a new account+inquiry+reduction in AAOA usually results in a score drop, I'm wondering what might be going on here since my score did not drop as I was expecting.

Many thanks in advance.

[Lucid08]

Anyone got any guesses on this one?

[RobertEG]

My guess is that the ScoreWatch was just an alert as to changed acount status.  Having ScoreWatch alerts does not mean that you also get a free update of your credit score showing the instantaneous impacts of the change.  Since the score was identical, I would bet they are only providing the score that your purchased prior to the alert.

[Lucid08]

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@RobertEG wrote:

My guess is that the ScoreWatch was just an alert as to changed acount status.  Having ScoreWatch alerts does not mean that you also get a free update of your credit score showing the instantaneous impacts of the change.  Since the score was identical, I would bet they are only providing the score that your purchased prior to the alert.

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OK, I am very confused now, as I thought Scorewatch was a real time monitor of your FICO score which gave alerts whenever your score deviated either up or down from the current baseline that the user has set in their preferences....??

[Junejer]

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Lucid08 wrote:

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@RobertEG wrote:

My guess is that the ScoreWatch was just an alert as to changed acount status.  Having ScoreWatch alerts does not mean that you also get a free update of your credit score showing the instantaneous impacts of the change.  Since the score was identical, I would bet they are only providing the score that your purchased prior to the alert.

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OK, I am very confused now, as I thought Scorewatch was a real time monitor of your FICO score which gave alerts whenever your score deviated either up or down from the current baseline that the user has set in their preferences....??

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Actually, SW (hence the name SCORE WATCH) does update the score, when there is a score change. Lately, it seems broken for me, as I haven't received an alert in over 10 weeks. The only thing that I can think of is that something else has also changed to offset the changes that you have mentioned.

[Lucid08]

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@Junejer wrote:

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@Lucid08 wrote:

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@RobertEG wrote:

My guess is that the ScoreWatch was just an alert as to changed acount status.  Having ScoreWatch alerts does not mean that you also get a free update of your credit score showing the instantaneous impacts of the change.  Since the score was identical, I would bet they are only providing the score that your purchased prior to the alert.

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OK, I am very confused now, as I thought Scorewatch was a real time monitor of your FICO score which gave alerts whenever your score deviated either up or down from the current baseline that the user has set in their preferences....??

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Actually, SW (hence the name SCORE WATCH) does update the score, when there is a score change. Lately, it seems broken for me, as I haven't received an alert in over 10 weeks. The only thing that I can think of is that something else has also changed to offset the changes that you have mentioned.

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As of the latest alert that I reference in my OP, my EQ report is unchanged except for the information I listed in the OP. I am carefully monitoring my score, as I am engaged in a personal experiment(of sorts) of manipulating my revolving balances across three CC's to see the effects on my FICO score. Today I just PIF'd one of the cards with the expectation of seeing a significant increase in my score in the coming weeks when the zero balance hits my EQ report.

One would think that with all other things being equal, that a new installment account, plus a hard inquiry would have a slight impact on my score, which is why I was surprised when my score remained unchanged on this latest alert.

I'm going to purchase a new "scorepower" report in a few minutes to see if my score has indeed changed. If it has, then I'll have to question my SW subscription and may consider canceling if it's not updating like it should be. I'll report back in a few minutes...

[Lucid08]

OK, I just purchased a new EQ Scorepower report dated Feb 4th 2009.

The previous SP(dated 1/05/09) report shows the old installment loan(referenced in my OP) as still being open with a small balance. The newly refinanced loan(with a new account number) is not showing on this report. My AAOA of accounts on this SP report is listed as 9 months.

The SP report I just bought tonight shows the old loan with a zero balance(old account number), and it also shows the newly refinanced account(new account number as of 12/08) with the newly refinanced balance being listed as well. However, my AAOA increased by 1 month to 10 months!! Also, my FICO remains unchanged from the previous SP report.

How on earth can this be?

Am I misunderstanding how AAOA is affected by newly opened installment accounts?

[Junejer]

Because your AAoA is so young as it is, a new account isn't having that much affect on it, would be what I surmise. All of your accounts have aged another couple of months since the new IL reported in Dec. The question would be how many total accounts are reporting on the CR (open and closed). If there are quited a few, your AAoA could certainly go up in that timeframe.

[Lucid08]

From what I understand about AAOA, it is calculated by using the total number of months combined across all accounts divided by the number of accounts. To illustrate(and see if I understand this correctly):

Please bear with me as I do this. As things always make more sense to me when I write them down..

Lets say I have a total of 4 accounts, with them all being less than 2 years(24 months) old:

Account 1 - opened 15 months ago - still open

Account 2 - opened 13 months ago - now closed

Account 3 - opened 8 months ago   - still open

Account 4 - opened 4 months ago   - now closed

Total age of all accounts would be 15+13+8+4 for a total of 40 months. Divide that by 4(total number of accounts), and you get an AAOA of 10 months. Length of credit history would be based on the oldest account, which in this case would be 1 year and 3 months(15 months).

Now, one month later a "new" account is added: Each account listed above will have aged by one month when you factor in the new account:

Account 1 - is now 16 months old

Account 2 - is now 14 months old

Account 3 - is now 9 months old

Account 4 - is now 5 months old

Account 5 - is now 1 month old

So, 16+14+9+5+1 equals 45 months total across all accounts. Divide 45 by 5(total number of accounts) and you get an AAOA of 9 months, with a total length of credit history of 1 year and 4 months(16 months). A drop of only 1 month, but still a drop.

Let's use someone who has 10 years worth of accounts, their numbers might look like this:

Account 1 - 120 months old

Account 2 - 96 months old

Account 3 - 84 months old

Account 4 - 24 months old

120+96+84+24 is a total of 324 months. Divided by 4 accounts you have an AAOA of 81 months, or an AAOA of 6.75 years.

Let's say this consumer buys a car in 6 months. When the new account shows up the numbers will look like this:

Account 1 - 126 months

Account 2 - 102 months

Account 3 - 90 months

Account 4 - 30 months

Account 5 - 1 month

126+102+90+30+1 equals a total of 349 months. 349 divided by 5 equals an AAOA of 69.8 months(5.8 years).

Here we see a more substantial drop in AAOA from 6.75 years to 5.8 years, almost 12 full months of AAOA loss.

So I understand how "newness" plays a factor in the impact of how adding a new account is lessened, but a drop in AAOA is still a drop, so I dont understand how my AAOA went UP by a month(from 9 to 10 months) on the Score Power report I purchased the other night. I do understand that a 1 month difference in AAOA probably wont make a difference in a persons FICO score.

But anytime you add a new account, AAOA should drop regardless of longevity, not go up.

Is my understanding of this correct? Or are closed accounts factored in differently somehow as it seems you hinted in your last response?

::Edited for spelling and math::

Message Edited by Lucid08 on 02-06-2009 01:00 PM

[Junejer]

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Lucid08 wrote:

From what I understand about AAOA, it is calculated by using the total number of months combined across all accounts divided by the number of accounts. To illustrate(and see if I understand this correctly):

Please bear with me as I do this. As things always make more sense to me when I write them down..

Lets say I have a total of 4 accounts, with them all being less than 2 years(24 months) old:

Account 1 - opened 15 months ago - still open

Account 2 - opened 13 months ago - now closed

Account 3 - opened 8 months ago   - still open

Account 4 - opened 4 months ago   - now closed

Total age of all accounts would be 15+13+8+4 for a total of 40 months. Divide that by 4(total number of accounts), and you get an AAOA of 10 months. Length of credit history would be based on the oldest account, which in this case would be 1 year and 3 months(15 months).

Now, one month later a "new" account is added: Each account listed above will have aged by one month when you factor in the new account:

Account 1 - is now 16 months old

Account 2 - is now 14 months old

Account 3 - is now 9 months old

Account 4 - is now 5 months old

Account 5 - is now 1 month old

So, 16+14+9+5+1 equals 45 months total across all accounts. Divide 45 by 5(total number of accounts) and you get an AAOA of 9 months, with a total length of credit history of 1 year and 4 months(16 months). A drop of only 1 month, but still a drop.

Let's use someone who has 10 years worth of accounts, their numbers might look like this:

Account 1 - 120 months old

Account 2 - 96 months old

Account 3 - 84 months old

Account 4 - 24 months old

120+96+84+24 is a total of 324 months. Divided by 4 accounts you have an AAOA of 81 months, or an AAOA of 6.75 years.

Let's say this consumer buys a car in 6 months. When the new account shows up the numbers will look like this:

Account 1 - 126 months

Account 2 - 102 months

Account 3 - 90 months

Account 4 - 30 months

Account 5 - 1 month

126+102+90+30+1 equals a total of 349 months. 349 divided by 5 equals an AAOA of 69.8 months(5.8 years).

Here we see a more substantial drop in AAOA from 6.75 years to 5.8 years, almost 12 full months of AAOA loss.

So I understand how "newness" plays a factor in the impact of how adding a new account is lessened, but a drop in AAOA is still a drop, so I dont understand how my AAOA went UP by a month(from 9 to 10 months) on the Score Power report I purchased the other night. I do understand that a 1 month difference in AAOA probably wont make a difference in a persons FICO score.

But anytime you add a new account, AAOA should drop regardless of longevity, not go up.

Is my understanding of this correct? Or are closed accounts factored in differently somehow as it seems you hinted in your last response?

::Edited for spelling and math::

Message Edited by Lucid08 on 02-06-2009 01:00 PM

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No, open and closed accounts are factored the same way.

 The only thing that I can offer is that your accounts all aged two months, not one, from Dec to Feb.  In the scheme of things (not to make light of the situation) 9 months, 10 months, toe-may-toe, toe-ma-toe.  You could receive a bump at the one year mark.