topic Re: Can adding a new CC lower my score? in Understanding FICO® Scoring

Can adding a new CC lower my score?

Anonymous — Sun, 27 Mar 2016 09:47:02 GMT

Hey folks!

My question is in the subjet! Can it lower my score? I'm missing 3 items on my report at the moment. Walmart CLI, Chase Freedom, AMX BCE card accounts. However CK says my scores lowered by 5-6 points avg when my CSP reported this morning, I know its a fako but I thought it was funny! (Credit checks will also lower it I know that but I thoght the huge CLI over all would out weigh it? I could be wrong )

Thanks!

Re: Can adding a new CC lower my score?

rebuilding123 — Sun, 27 Mar 2016 09:50:53 GMT

Not sure exactly, but maybe the slight drop because AAoA? Also, the Balance wouldnt affect your UTI factor too much if you are already sitting at a decent UTI.

Re: Can adding a new CC lower my score?

Anonymous — Sun, 27 Mar 2016 10:00:41 GMT

Yeah I'm at 1% before and after.

Re: Can adding a new CC lower my score?

Anonymous — Sun, 27 Mar 2016 12:24:34 GMT

Yes. There are a number of factors that the presence of a brand new account affects, any of which can lower your score:

Average Age of Accounts

Age of youngest account

Percentage of accounts that are "new" (< a year old, say)

Additionally if an inquiry also associated with the account is just reporting, that inquiry could also lower your score.

A sllightly more exotic reeason is that FICO regards certain kinds of accounts as just plain bad. For example, what are called "Finance company" accounts. Thus, if a new FC account appears, that will lower your score.

Re: Can adding a new CC lower my score?

rebuilding123 — Sun, 27 Mar 2016 13:26:10 GMT

Would credit one by chance be considered a finance company?

Re: Can adding a new CC lower my score?

Anonymous — Sun, 27 Mar 2016 13:54:18 GMT

I don't know anytging about Credit One. I just googled IS CREDIT ONE A FINANCE COMPANY and did not see any hits that shed immediate light. But do continue to use google (I suggest "Why is a Finance Company bad for your credit score" and "What is a finance company").

Gotta run. Good luck

Re: Can adding a new CC lower my score?

CreditDunce — Mon, 28 Mar 2016 04:10:52 GMT

CreditOne is a national bank. It isn't considered a consumer finance company by FICO. However, it is always possible it is considered bad on some internal credit models.

Consumer finance are things like furniture store financing. FICO considers it bad because most people would use the financing if they had other options.

Note: I believe it is 2 years for new accounts with FICO. The INQ penalty goes away after 1 year.

Re: Can adding a new CC lower my score?

rebuilding123 — Mon, 28 Mar 2016 06:07:01 GMT

Thanks for the help guys! Sorry to hijack your thread OP!!

Re: Can adding a new CC lower my score?

Anonymous — Mon, 28 Mar 2016 14:16:24 GMT

Hey CD! Somebody posted a link (last fall) to an official FICO publication that clearly implied that their cutoff for what constituted a "new" account was 1 year. I think it may have been Thom Thumb. It was smuggled pretty far into the document but was unmistable nonetheless. I had always leaned towards thinking that FICO implemented new = < 2 years as well, so I remember being struck by that at the time.

Naturally I forgot to save the link. :-)

But however FICO defines it internally (1 year or 2) adding a brand new account certainly constitutes a new account, and could cause a profile's percentage of new accounts to cross over some tipping point. The New Credit category does seem to count the number of new accounts that you have as a factor.

Re: Can adding a new CC lower my score?

CreditDunce — Tue, 29 Mar 2016 01:20:45 GMT

I also don't have any documentation about what FICO considers new accounts. I am fairly sure codes 08 and 09 are 12 months, so maybe code 30 is also 12 months.

The best evidence for 2 years I could find is this post:

http://paycheck-chronicles.military.com/2011/07/09/smart-not-perfect/

They claimed now new accounts for 15 months but code 30 is #1 on their mortgage app

One post isn't proof. Unless someone else has code 30 without any new accounts in the past year, let's go with new account is less than 12 months.

Reference codes:

08 Too many recent inquiries in the last 12 months

09 Too many accounts recently opened (I have also seen it "Too many accounts opened in the last 12 months")

30 Time since most recent account opening too short

EDIT: on cold medication. Typo

Re: Can adding a new CC lower my score?

Revelate — Tue, 29 Mar 2016 03:00:10 GMT

@Anonymous wrote:
Hey CD! Somebody posted a link (last fall) to an official FICO publication that clearly implied that their cutoff for what constituted a "new" account was 1 year. I think it may have been Thom Thumb. It was smuggled pretty far into the document but was unmistable nonetheless. I had always leaned towards thinking that FICO implemented new = < 2 years as well, so I remember being struck by that at the time.

Naturally I forgot to save the link. :-)

But however FICO defines it internally (1 year or 2) adding a brand new account certainly constitutes a new account, and could cause a profile's percentage of new accounts to cross over some tipping point. The New Credit category does seem to count the number of new accounts that you have as a factor.

Doubt it. I was clean for 13 months and then took 4 new tradelines, nothing, nothing, nothing, drop when I crossed an AAOA boundary. I've never ever found a "new accounts" penalty in the algorithm but I've never been clean for 2 years either.

Re: Can adding a new CC lower my score?

CreditDunce — Wed, 30 Mar 2016 07:57:21 GMT

There is a reason code for most recent account being too new. I don't know how recent is too new or how much a penalty, but there has to be a penalty. At least in some buckets. It is one of my codes.

Re: Can adding a new CC lower my score?

Thomas_Thumb — Wed, 30 Mar 2016 22:44:30 GMT

Here are a couple screen shotson Fico Reason codes. I came across this "little gem" a few months back. I saved the PDF but I have no link to it. There are 99 reason codes in the document. If you can find it, great - I couldn't relocate. {new accounts is mentioned - but this particular document does not define "new" in terms of length of time.

I'll search my electronic library when time permits for other info on new accounts.

Time since most recent account opening is too short

Your FICO® Score considers how recently you opened a new credit account. People who recently opened a new credit account are more likely to miss future payments than those who have not.

Actions You Can Take Avoid opening more credit accounts at this time and as a general rule, if you don't need or plan to use credit, don't apply for it.

Re: Can adding a new CC lower my score?

CreditDunce — Wed, 30 Mar 2016 23:50:18 GMT

I believe the PDF TT is referring to is:

https://figfcu.com/documents/fico/FICO%C2%AE%20Score%20Factors%20Guide%20-%20Experian.pdf

Old threads we listed reason codes in:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Complete-list-of-FICO-Reason-Codes/td-p/3694935

Here is a url that attempts to explain the various codes:

http://www.debtorsunite.org/credit-score-factors-risk-codes/

I have never found a definitive answer to what new means. It is one of my codes, but I haven't lasted 12 months without an app since I have started adding trade lines.

Re: Can adding a new CC lower my score?

Anonymous — Thu, 07 Apr 2016 21:52:03 GMT

Hey CD. I just found that document published by FICO (Jan 2015) that defines "new account" to be one opened in the last 12 months. I think it may have been TT who originally alerted me to it.

http://www.car.org/media/pdf/Back_to_Basics_FICO_Myths_Debunked.pdf

You can their implied definition on slide 21:

New accounts —number of tradelines opened in last year

Re: Can adding a new CC lower my score?

Revelate — Fri, 08 Apr 2016 01:17:29 GMT

@Anonymous wrote:
Hey CD. I just found that document published by FICO (Jan 2015) that defines "new account" to be one opened in the last 12 months. I think it may have been TT who originally alerted me to it.

http://www.car.org/media/pdf/Back_to_Basics_FICO_Myths_Debunked.pdf

You can their implied definition on slide 21:

New accounts —number of tradelines opened in last year

Hrm.

I've gone >1 year previously and then app spreed: all my data suggests there wasn't a seasoning boundary at 12 months as any drop I incurred from new tradelines was a result of AAOA changes rather than anything else (or letting a new large balance report which was sorted right quick like). My memory is foggy as to whether that was tested when Scorewatch was still Beacon 5.0 or if we'd switched to Beacon 9.0.

Actually I can pull this out of last year's data since some CC's reported before mortgage and that was FICO 8 for sho:

My report was seriously busy but my first tradeline to report was the Penfed PLOC with no change in FICO score.

Last tradeline opened prior to that was May 14 (compared to 8/15) so more than 12 months.

Second tradeline to report was a CSP with a 7K balance (-5 points) and I gained the 5 points right back after I paid it, go go Chase mid-cycle report.