topic Re: When is an account no longer considered "new"? in Understanding FICO® Scoring

When is an account no longer considered "new"?

805orbust — Mon, 28 Nov 2016 02:27:13 GMT

I've seen several opinions on this, however, say for FICO8 models, when is an account no longer considered new? 6 mos? 1 year? 2 years? Curious as I haven't monitored this data point closely on my reports and will have a few hit the one year mark in 2017 while I shed the 5/24 label.

Re: When is an account no longer considered "new"?

Anonymous — Tue, 29 Nov 2016 14:13:14 GMT

Just for the benefit of anyone reading this thread, our OP is asking about a few factors that are confined to the New Credit Category:

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

FICO's language there seems to imply that a given model has an "either/or" classification where it categorizes every account as either "new" or "not new." Then it says:

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.

My personal opinion is that the key is the second sentence, which is probably implemented as a percentage. I.e. what percentage of your total accounts are new? The model then probably has some different cutoffs where penalties begin. E.g. perhaps < 25% is no penalty.

The trouble is in guessing what the denominator is for that percentage. Is it all accounts, closed and open? Is the denominator just open accounts? The Lexis Nexis scoring model implements this as New accounts (closed or open) divided by Total Open Accounts. Thus the percent can actually go over 100%. (E.g if a person has 5 new accounts, but only 4 open accounts.)

Because the details of how FICO implements this factor are unknown (as I just mentioned) and because the timing of an account turning 1 year old often coincides with inquiries turning one year old, it's very difficult to analyze "data points" in a meaningful way here. You'd need a statistician with lots of information (total accounts, total open accounts, inquiries turning 1 year at the same time, etc.) on many different people and profiles before you could begin to attempt to backward-engineer what the FICO algorithm might be for a particular model.

All that said, I think the internal definition for FICO may be 1 year. (I.e. an account < 365 days old is "new".) For Lexis Nexis the definition is 24 months (we have explicit published reason codes that confirm this.) But in FICO's case one year may be right -- I think I saw some FICO white papers that clearly implied this last year (that somebody on the Forum linked to).

Final thought:

The either-or definition (either an account is new or it isn't) may also be used in the assigning a clean credit profile to a scorecard. Thus, if at least one account is new then your profile is categorized as having "New Credit" and that pushes you toward certain scorecards, whereas if none of your accounts are new that pushes you toward other scorecards.

Re: When is an account no longer considered "new"?

805orbust — Tue, 29 Nov 2016 04:07:57 GMT

Whoa. CGID that is a better answer than I could have hoped for. Thanks a lot. Much appreciated. Lots of great info there.

Re: When is an account no longer considered "new"?

CreditDunce — Sat, 03 Dec 2016 07:36:42 GMT

New credit is my number one reason codes for FICO 08 and 04. For FICO 08 it says:

1. Time since most recent account opening is too short

2. Length of time accounts have been established (Not a new credit code, but my #2 code)

When I only let a couple of cards report a balance, my top two reasons codes for EQ-04 are

1. You recently opened a new credit account
2. You've recently opened too many new credit accounts

My EX-98 and NextGen EQ scores have never shown a code for new credit.

Conclusion

My limited data implies:

1) FICO considers accounts new for over 1 year. My guess would be 2 years. I spaced my last app spree at just over 1 year.

2) EQ-04 penalizes for having a new credit account and the total number of new accounts. .FICO 08 mostly penalizes you for having a new account, not the total number of new accounts. My FICO 08 scores don't see to be hurt by adding new TLs unless my AAoA goes down. If new trade lines hurt in EX-98 and NextGen then it is much less of a penalty.

Caveats:

1) I did my last app spree at just over 1 year from the previous app spree. It is possible I barely missed the cutoff for the new credit penalty. I would need to not app for two years to be test my theory.

2) I do not have any negatives on my CR. Dirty files could be handled differently

3) Reason codes are not infallible. I could be penalized and not have a reason code.

4) My EX-98 score is not very high (801 last time I didn't let a lot of cards report a balance). It is possible other factors are masking new credit codes. My last NextGen (886) was pulled just after I had added 4 new TLs. I don't think there is much room in my NextGen for much of a new credit penalty.

Re: When is an account no longer considered "new"?

Anonymous — Sat, 03 Dec 2016 08:35:59 GMT

Thanks CD!

How many accounts do you have total? (Closed and open together)

How many were opened in the last year?

How many were opened in the last two years?

How many open accounts do you have?

Re: When is an account no longer considered "new"?

CreditDunce — Sat, 03 Dec 2016 16:22:44 GMT

I currently have:

6 TL < 1 year

18 TL < 2 years - several are approaching 2 years, 1 just crossed

15 TL > 2 years. Not all of the older accounts are on all CRA's. Each CRA has 29 or 31 TLs. 23 are open on each CRA. Actually, EQ shows a closed LOC as open, making 24.

Latest scores:

EQ-04 745 EX-98 775

EQ-08 843 EX-08 828 TU-08 835

EQ managed not to get any HP last app spree. The mortgage scores are low because I have 13 of 18 open CC's reporting a balance.

AAoA 5-6 years. Overall Util 1%.

Testing for code "Time since most recent account opening is too short" would be easy if I stopped app'g. It is my #1 code on all of my FICO 08 scores.

Re: When is an account no longer considered "new"?

Anonymous — Sat, 03 Dec 2016 17:24:33 GMT

In the factor where FICO looks at the percentage of accounts that are "new."....

If the cutoff for that factor is one year, then only a small minority of your accounts are new. Therefore you wouldn't be seeing any impact there. And in general, even when you add accounts, you will tend not to see any impact from it, because your particular profile already has so many Where this factor would come into play, is when a person had a big chunk of his accounts having been opened recently.

LexisNexis is really transparent about exactly how they implement this in their model. I believe it is total number of new accounts divided by total number of open accounts (and thus the resulting % can go over 100%).

The other factor you've mentioned (age of youngest account) is very important because it is used in scorecard assignment. So I am not surprised that you are seeing it a lot. Because in your case you always have at least one account opened fairly recently, and therefore you are always being placed in a scorecard for people with recent credit, which may have a ceiling for its score.

Re: When is an account no longer considered "new"?

CreditDunce — Sat, 03 Dec 2016 20:46:16 GMT

It is possible I am not crossing the % number with FICO 08, but I am with FICO 04. One more thing to consider is I wasn't getting the too many recent accounts with FICO 08 before my last app spree. Only the time since your last new credit account is too recent. I believe I had 7 accounts under 1 year with a total of 23-25 total TLs. That would put the % of TLs under 1 year above 30% (at least on my TU CRA).

I do agree, yearly app sprees are going to make it impossible to get an 850. It is a good think 850 isn't one of my goals. Maybe I can try to go 13 months without an app to see if the new credit reason codes go away.

PS. Just because I don't see a code for the number of new TLs, doesn't mean my score isn't being hurt by it. It would imply the effect is minimum, though.

Re: When is an account no longer considered "new"?

Anonymous — Wed, 07 Dec 2016 00:31:51 GMT

I know this isn't directly related to the topic in discussion, but upon pulling my CCT 3B scores today, for the first time in the reason codes section of "Factors helping your score" under TU I see "Not seeking credit."

I find this rather amusing as 5 months ago I added 3 new accounts (all of which reported to TU). Based on this reason code, I would be led to believe that TU doesn't consider accounts 5 months old to be "new" which to me doesn't make sense. I'm sure this is one of those cases where the reason codes by the monitoring software simply don't match the FICO scoring criteria, but I thought I'd share this anyway.

Re: When is an account no longer considered "new"?

Anonymous — Wed, 07 Dec 2016 00:55:05 GMT

Hey BBS. Interesting piece of news. My initial feeling was exasperation -- this really means FICO's reason codes are complete fantasies if it can say this. I mean how recent does it have to be -- two weeks ago?

But then I had one thought. Is it possible that the code is looking at the percentage of your total accounts that are new? If so, and if you really have a relatively small percentage of accounts that are new, then this might be far less crazy.

Re: When is an account no longer considered "new"?

Anonymous — Wed, 07 Dec 2016 01:50:05 GMT

You never know. Before these 3 accounts it had been 1 year and 3 months since I last opened 2 accounts, then 3 years prior I opened 2 accounts. Total accounts sit at 22, 8 of which are open, 14 closed to provide some more data on the subject.

Re: When is an account no longer considered "new"?

Anonymous — Wed, 07 Dec 2016 02:17:55 GMT

This may explain it then. If FICO defines "new" as less than 24 months, then you have exactly 5 new accounts out of 22. That's less than 25%.

If that is what that "reason" is getting at then that would be far less crazy. (If FICO defines new as less than 12 months, then you have less than 15% of your accounts being new.)

I will say that the Vantage 3 reason codes are in general far less ambiguous and nutty.

Re: When is an account no longer considered "new"?

Anonymous — Wed, 07 Dec 2016 12:45:38 GMT

@Anonymous wrote:
This may explain it then. If FICO defines "new" as less than 24 months, then you have exactly 5 new accounts out of 22. That's less than 25%.

If that is what that "reason" is getting at then that would be far less crazy. (If FICO defines new as less than 12 months, then you have less than 15% of your accounts being new.)

I will say that the Vantage 3 reason codes are in general far less ambiguous and nutty.

That makes sense. What doesn't really make sense though is that only TU provided me with that reason code. It's not just this reason code. In the past it's often been a head scratcher as to why one bureau will contain reason code(s) that the others don't. Of course there are also examples of contradicting reason codes, or ones that both say they are helping your score with one bureau yet hurting you on another bureau. I guess the moral of the story is not to put too much thought into reason codes in general! It seems more often than not they raise more questions rather than provide answers.

Re: When is an account no longer considered "new"?

805orbust — Wed, 07 Dec 2016 13:28:40 GMT

Good...friggin...information here guys. This is awesome. Although I get smacked around on here for it all the time, I have ALWAYS believed that the reason codes are bull... or at the very least ambiguous/inconsistent enough not to be taken absolutely.

Re: When is an account no longer considered "new"?

Anonymous — Wed, 07 Dec 2016 14:39:42 GMT

No doubt about it.

I'll give you a perfect example. Yesterday when I pulled my scores, under "What's hurting your score?" I had the reason code "Few current accounts" which on the next line is defined as "Number of your accounts currently being paid as agreed. 8 accounts."

Currently I have 8 open accounts on my reports, and all 8 have flawless payment history. The only 2 accounts that I have with late payments are closed... so they aren't "current" accounts. Which means, the definition of their reason codes doesn't match the actual codes as it is obviously including past (closed) accounts into this. But, if that's the case, why wouldn't I have received this reason code sooner since those lates have been on those closed accounts for years?

To further punctuate how bogus this reason code is... 5 months ago I opened 3 of these accounts, so 5 months ago I had 5 current accounts. I find it amusing that with only 5 current accounts I didn't receive this reason code, yet now 5 months later with 8 current accounts I get the reason code. Just another example of how reason codes don't make sense!

Re: When is an account no longer considered "new"?

805orbust — Thu, 08 Dec 2016 03:08:57 GMT

A natural assumption would be that you've got accounts that are not being paid as agreed. Ridiculous. How is that at all logical? Furthermore, how are scores above 750 being "hurt" by anything? All of this needs to be taken with a HUGE grain of salt.

Re: When is an account no longer considered "new"?

surferchris — Thu, 08 Dec 2016 05:28:40 GMT

This is all very good information, thanks everyone!

Re: When is an account no longer considered "new"?

vanillabean — Thu, 08 Dec 2016 19:54:28 GMT

@Anonymous wrote:

Because the details of how FICO implements this factor are unknown (as I just mentioned) and because the timing of an account turning 1 year old often coincides with inquiries turning one year old, it's very difficult to analyze "data points" in a meaningful way here.

I have passed the one year mark for new credit on my one recent account, followed a couple of days later by my three FICO 08 scores all increasing nicely, whereas little happened a month earlier when the inquiry dropped off. This is opposite of what happens to FICO 04 which keeps the inquiry in full force until the last day, unlike the impact of new credit which gradually tapers off.

It can be added that I pay no attention on how the myFICO report rates my score ingredients which are not coming directly from the FICO algorithm, e.g. listing my amount of new credit as very good rather than exceptional when my score is 850. I would much rather have the reason codes listed.

Re: When is an account no longer considered "new"?

JLK93 — Fri, 09 Dec 2016 01:36:18 GMT

I don't generally pay any attention to reason codes. In spite of my indifference, I consider it to be unbelievably silly that myFICO doesn't provide reason codes for FICO scores over 800. The codes are being generated by FICO. There is no reason to not report them.

On September 1st my youngest account aged to 1 year and my TU FICO jumped to 850. I just reviewed my historical Discover TU FICO scores. For the 6 months prior to September, the only reason code I received from Discover was "TIME SINCE MOST RECENT ACCOUNT OPENING IS TOO SHORT." The reason code was, of course, generated by FICO. The reason code is now gone.

When I reached 850 on September 1st, I had 3 inquiries in the last year. The inquiries didn't prevent the 850 score. So, the reason code seems to have been correct. The only thing preventing the TU 850 score was the youngest account.

Youngest account aging to 1 year seems to be a significant rebucketing event for FICO 8 and 9. Youngest account aging to 6 months is a rebucketing event for FICO 04. However, I suspect that there is probably a minor scoring benefit to youngest account reaching 2 years for all scoring models. There seem to be virtually no data points on any forum for youngest accounts reaching 2 years.

Re: When is an account no longer considered "new"?

JLK93 — Fri, 09 Dec 2016 01:42:28 GMT

@Anonymous-own-fico wrote:

I have passed the one year mark for new credit on my one recent account, followed a couple of days later by my three FICO 08 scores all increasing nicely,

I had a similar experience. If you don't mind my asking, how much did your FICO 8 scores increase? How many inqquiries did you have in the last year?