topic Re: new accounts aging in Understanding FICO® Scoring

new accounts aging

granny031350 — Sat, 05 Apr 2008 15:25:07 GMT

Is it safe to say that any score drop from adding new accounts can be regained in 3 months (or more- I realize the best is 12 months) with on time payments etc. All of my new accounts are now reporting and I have had a score drop average of about 20 points across the board. But I have increased my available credit and lowered my utilization in the process. I am now credit gardening to steal a term from another poster and will sit back and watch my scores recover. So is it safe to say that by August, I should be climbing even higher?

Re: new accounts aging

Anonymous — Sat, 05 Apr 2008 17:10:36 GMT

Yes granny, that's a safe assumption. I'm quite anxious for the new accounts to reach the 6 month mark myself. I have a lot of them. lol

Re: new accounts aging

RobertEG — Sat, 05 Apr 2008 23:02:26 GMT

Granny, it may not be such a "safe assumption." New accounts do not have only a "one category" effect on FICO scoring. What you can clearly expect, as the new account nears and goes over one year, is drop off of the effect of the inquiry that was reported to estblish the new account. So you willl get a gain in the new inq. category. But new inquiries are both fleeting in time importance, being only 10% of FICO score, and dropping off at one year.

More important and long-lasting categories are affected. For example, if your avg age of accounts was not high before the new accounts were added, then the adverse affect of adding accounts with relativley zero age on the overall lenght of credit category will mathematically hurt FICO, and FICO is math.

So, on to the new accounts themselves, once established. Instant joy! I now have a higher overall CL!!! Neat! But... . if the new accounts added were low CL accounts, even low balances against them will result in higher %util against them individually, even though overall %util may decrease. And, aside from %util alone, it may also result in a higher number of revolving accounts with balances. For example, if you had three CCs before opening the new ones, and only one reported balances each month, you were in good shape with only 1/3 of your cards showing balances. But with the addition of, for example three new accounts, then if only two of those three new accounts show balances next month,then you are now at over 50% of cards showing balances. FICO also scores this. And further, if one new card is a low $300 CL card, and you charge $200 on it next month, you are at 67% util on that card.

So, questions to ask: How much did the new cards affect your avg age? And as you have used the new accounts,what is the %util and balance on each after they were added?

IMHO, adding new accounts may add instant increase in overall CL, and thus appear as only a positive, but it is not that simple. They also add the burden of additional monitoring each for their impact in the other FICO factors, of which %util of each card, zero+ age on the new card, and number of cards with balances, is also very important.

So, IMHO, it is not a "safe assumption" that new card impact will disappear into the FICO ether of non-importance after six months or even one year. It is not a simle question for which one can expect a simple answer, It is all in your hands.

Message Edited by RobertEG on 04-05-2008 02:46 PM

Message Edited by RobertEG on 04-05-2008 03:52 PM

Message Edited by RobertEG on 04-05-2008 04:02 PM

Re: new accounts aging

Anonymous — Sat, 05 Apr 2008 22:27:49 GMT

granny, The hard hit was because you deluded your length of history. remember that 65% of your scores come from history & CC.

My son took a hit like you did. His scores were around 635 he took out 5 CC and doubled his UTIL.

What hurt was that he tansferred a few account for new CC 0% int. so for 1 month both creditors were reporting (the new & the old) his scores went down to 619.

It has been less then a year and his scores are at 695.

That is not to say that is where you will be because everyones CR is different. but your scores will come up.

Message Edited by HappyDays on 04-05-2008 03:27 PM

Re: new accounts aging

granny031350 — Sun, 06 Apr 2008 11:48:03 GMT

Thank you all for your answers. I am still figuring all this stuff out. I was unaware that not only low util mattered but that having zero balance on at least 1/2 of your cards mattered as well in the FICO scoring scheme. I believe that has affected my score as Robert mentioned. So this month, when I pay, I am concentrating on making more cards report zero balance. I was spreading out my payments and trying to keep util on each card low but now I am beginning to understand that even if higher util on one card reports, FICO is still scoring as a balance reported. So am revising my pay plan as well. And I do have 8 cards to manage now. However I have a system where every morning I log in to each account. I pay more than the minimum for the month the minute the new statement cuts. Then before the due date of that card, I pay another amount depending on if that card is one I am taking to zero or letting report a balance. Since I am retired I have the time every morning to do this and it seems to be working. But thanks all for all the help I have received here. It is really enlightening.

Re: new accounts aging

haulingthescoreup — Sun, 06 Apr 2008 14:03:00 GMT

Hi, granny --acquiring a normal amount of new credit probably allows your scores to recover in 3-4 months. A feeding frenzy like mine seems to be a bit different! Although TU and EX have already come back 5-10 points in a month. (I'm not updating EQ until they fix ScoreWatch.)

From the comments that I'm getting on my reports, I think that I re-bucketed myself. I thought that the age bucket was driven only by the age of the oldest account, but it looks like it can be either that or average age. For instance, at one point after the app-a-rama, my util showed as 19%, and that was listed as a positive factor. I can promise you that it would not have been a positive before!

I think that you have a more-than-decent chance to see score recovery and improvement by August, all other things being equal. Good luck!