topic Re: New credit in Understanding FICO® Scoring

New credit

Anonymous — Sun, 21 Nov 2010 23:04:29 GMT

How does the new credit ding reduce with time? Is it forgotten after 6 months or 1 year? Some posts on this forum seem to suggest the latter, but the FICO simulator at bankrate.com docks -10 for a new account in the last 3 months, -5 for a new account within the last 3-6 months, and nothing for older than 6 months.

Re: New credit

ficonightmare — Mon, 22 Nov 2010 12:21:57 GMT

The initial ding your get from opening a new card is the inquiry ding. I've read here that's it's minimal, and while it reports for uo to 2 years, I believe it only affects your score for 1.

The score drop isn't really caused by the inquiry, but rather by the new account. So what happens is your overall AAoA drops thus lowering your score.

For instance, my oldest account is 15 years, my newest is about 9 months. My AAoA is 7 years. If I were to keep opening new accounts, my AAoA would keep dropping.

There's nothing you can really do about that one but wait..

Re: New credit

Anonymous — Mon, 22 Nov 2010 14:23:14 GMT

FN, I believe there is a ding due the newness of credit itself, at least there was in my case. I confirmed that the inquiry did not cost anything. The AAoA was unaffected because of the new card. I believe there was a ding simply due to "new credit", i.e., if the most recent account was opened too recently. I lost about 10 points due to this and wonder how soon I'll get them back.

Re: New credit

Anonymous — Mon, 22 Nov 2010 14:36:34 GMT

Right. There are two FICO reason codes for new accounts

#9 "Too many accounts recently opened" or "number of accounts opened within the past 12 months"

#30 "Time since most recent account opening is too short" - I'm guessing this is what your seeing.

Because any new loan creates additional risk, this factor can impact scores for several months immediately after opening a new loan.

Current guesstimates are about six months - although it may vary somewhat depending on other factors on your report.

I'm hoping for six months, because both DH and I are currently being hit with this one.

For others reading this post, AAofA is always rounded down, which is why avenka can state that "AAofA was unaffected." If your AAofA goes from 4.8 to 4.2, it will still report as 4 years.

Re: New credit

ficonightmare — Mon, 22 Nov 2010 14:58:57 GMT

@Anonymous wrote:
Right. There are two FICO reason codes for new accounts

#9 "Too many accounts recently opened" or "number of accounts opened within the past 12 months"

#30 "Time since most recent account opening is too short" - I'm guessing this is what your seeing.

Because any new loan creates additional risk, this factor can impact scores for several months immediately after opening a new loan.
Current guesstimates are about six months - although it may vary somewhat depending on other factors on your report.

I'm hoping for six months, because both DH and I are currently being hit with this one.

For others reading this post, AAofA is always rounded down, which is why avenka can state that "AAofA was unaffected." If your AAofA goes from 4.8 to 4.2, it will still report as 4 years.
Good to know.
Learn something new here everyday.

Re: New credit

Anonymous — Mon, 22 Nov 2010 15:13:03 GMT

ficonightmare wrote:
Learn something new here everyday.

Me, too - That's why I love this site. BTW, ficonightmare, your comments earlier in this post were spot on.

Re: New credit

Anonymous — Mon, 22 Nov 2010 17:44:51 GMT

Thanks for the responses. Six months seems about right and consistent with bankrate's simulator: +5 after 3 months and another +5 after 6 months.

Re: New credit

Anonymous — Mon, 22 Nov 2010 17:49:46 GMT

BeamMeUp, has it been 3 months for you/DH and did you see an increase at that point? If so, how much do you think the original hit was and how much did you gain back?

Re: New credit

llecs — Mon, 22 Nov 2010 19:43:14 GMT

In my case, the ding for the newness of the account hit as soon as they report and the damage lingers and seems to gradually fade for the first 4-6 months. I've also had points return when they hit at or near 12 months. Just today I got a SW alert for a 16 point gain. Util dropped only by 2% and is still high, but my newest account hits 1 year old next month. Also the negative comment on the +/- factors that hinted at this account being at 11 months went away today despite being there just last week. Of course YMMV based on your bucket, mix of credit, and so forth. If I added a new TL last week and it reported last week, I don't think I would have received a 16 point gain today.

Re: New credit

Anonymous — Mon, 22 Nov 2010 19:57:04 GMT

Wow, you must have lost a lot of points for the new account then. I am assuming you lost whatever faded in the first 6 months + 16 points. Or did you mean they were separate incidents where the former took just 6 months to reset and the latter took a year?

I am pretty confident I lost 11 points. It will hit 3 months next month. Will let you know if I got back any of the lost points.

Re: New credit

ficonightmare — Mon, 22 Nov 2010 23:29:52 GMT

Thanks beam

Will stick to lurking for awhile until I really understand what's going on (if i ever do )

Re: New credit

Anonymous — Tue, 23 Nov 2010 15:12:02 GMT

ficonightmare wrote: Thanks beam
Will stick to lurking for awhile until I really understand what's going on (if i ever do )

Lurking works well - but remember your posts are very helpful to folks. It's always good to hear what you have to contribute - that's one of the great things about the forums - lots of input keeps everything balanced. Again - your post was spot-on!

Re: New credit

llecs — Tue, 23 Nov 2010 16:29:39 GMT

@Anonymous wrote:
ficonightmare wrote: Thanks beam
Will stick to lurking for awhile until I really understand what's going on (if i ever do )
Lurking works well - but remember your posts are very helpful to folks. It's always good to hear what you have to contribute - that's one of the great things about the forums - lots of input keeps everything balanced. Again - your post was spot-on!

+1 to beamMEup. Your posts are great! I just guess when I post...I have no clue what I'm talking about. I rely on others to set me straight. BTW, who learns more, the teacher or the student...always the teacher.