Opening new accounts for AAOA down the line?

[Anonymous]

Since I have relatively limited credit history at this point (really didn't think about using/needing CCs for the longest time), I was wondering if it would make sense to open some accounts JUST so I'll have a better AAOA down the line? For example, the NFCU secured card doesn't have an AF and from what the rep told me on the phone I'd just take a soft pull for the app at this point - so I could just open one, put whatever minimum deposit they have down for it, and just forget about the card. Sooner or later it would unsecure I'm sure, but that way a few years down the line I'll have another card reporting in my credit history and help my AAOA once I'm ready to apply for some prime cards.

So I guess the question is, when you have limited credit history and a short AAOA, does it make sense to open up cards just for a future AAOA increase? With it being just a soft pull and no AF, I guess the main drawback would be taking a credit hit for opening another new account.

[haulingthescoreup]

The FICO score formula seems to punish new accounts less severely for those with short AAoA like you. After all, you have to start somewhere.

Do you have any open revolving credit now? Any open installment credit?

For those starting from scratch, I'd advise getting two cards --only two! --and letting them cook for a while. Use the tactics recommended here on the boards to control reported util and to make the lenders happy, and let your FICO scores increase on their own. The scores will increase along with your AAoA. Then when you're ready, you'll be competitive for prime cards.

Try to avoid fee cards if you can, but if you wind up with them, grin and bear it. Don't close them until you get the better cards later.

A secured card would be a great option, although I don't keep track of which cards unsecure and which don't.

[Anonymous]

I have 3 credit cards (two unsecured, one secured), but no installment loans. I was actually looking at maybe adding in some kind of credit builder loan, but my bank (U.S. Bank) said they don't offer any kind of secured loans, I'd have to actually qualify for a personal loan and they don't extend those easily.

I just joined NFCU, so I'm not sure if they might have something like that - I'm hoping they do. Once I find out if I can get a credit card from them I'll probably look into getting a low amount secured (through a CD or whatever) loan from them so I have an installment loan to pay off too. I don't know if they have anything like that specifically, but they have told me (several times already) over the phone that they do offer all kinds of loans and mortgages too, so I'm guessing they do.

As far as the credit cards go, I'm looking to close the secured one - it's my highest limit card, but it has an AF, and Cap One told me they won't be unsecuring it, and there's no way I'm going to leave them sitting on almost $3k of my money indefinitely while charging me an annual fee for it. That's why I'm thinking of opening a secured card with NFCU instead, since they just seem overall way better - plus no AF.

[haulingthescoreup]

Well, it depends on what your actual goal is.

Your thread title and initial post made it sound as if you were trying to increase your AAoA to improve the chance of future approvals.

But every time you open another account now, whether revolving or installment, you will drop your AAoA instead. The only exception would be if you had an American Express card (from American Express, not issued by BofA, Citi, USAA, etc.) and opened a new card. That new card would pick up the opening year of the old card, potentially increasing your AAoA.

What's your AAoA now? What is your ultimate goal?

If you're trying to increase your AAoA to improve your chances of getting better cards in the future, your best bet is to keep what you have and don't get anything new until you reach whatever point you're trying to reach.

If all you want to do is upgrade your cards now, you can do this, assuming that your scores and reports are good enough for approval. Don't close the Cap One card until you replace it, because it will help to have that CL showing. Have all your cards reporting $0 (not just paid off after the statement, but reporting $0), except for one with a minimal balance. That will improve your chances of acceptance and a halfway-decent CL. But do realize that if you get a new account, your AAoA will drop.

[Anonymous]

I guess I wasn't clear enough in the intial post, sorry about that.

I do want to close that one Cap1 card, but that's just because I'm not going to let them sit on $3k of my money indefinitely. I don't like them enough to give them that much money and not get it back. But that's basically irrelevant right now - just saying that I plan to close that card soon so it's not really going to help with my AAOA anyway.

My point was if it would make sense to open multiple accounts right now, with the explicit goal of having them help my AAOA several years down the line. Right now my AAOA is less than a year, since I've only had the cards since 2010. So the impact (to my AAOA) of adding any new cards in is minimal since the account age is so low anyway. With the AAOA being so low right now, adding new cards wouldn't really do anything at all to it right now anyway.

But if I open a couple of accounts now and just let them mature for several years, they'll all contribute towards my AAOA down the line. So in say 5-10 years, I'll have more older accounts reporting on my credit history, so if I apply for a new card then, the drop in my AAOA would be less severe - right?

This isn't as easy to explain as it is in my head, I guess. So, lets take an example.

I have 3 cards now. If I wait 10 years, they'll have an AAOA of 10 and a total age of 30. At that point, maybe I'll apply for another credit card and a store card, or whatever. So then I'd have 3 old cards + 2 new ones, which means my AAOA would drop from 10 to 30/5 = 6 years.

But if right now I open a few more cards and just have them sit (something with no AF, obviously) for several years, then in 10 years I'd have 5 cards with an AAOA of 10. If at that point I added in the two new cards, then I'd be getting an AAOA of 50/7 = 7 years.

Hmm, I guess when I actually write the math down, the impact really isn't that huge. But I guess that means that if several years down the line I was to close one of the cards than would by then have a significantly longer history, it wouldn't hurt my AAOA as much since there would still be other old cards buffering things.

[haulingthescoreup]

Oh, OK, I gotcha now.

Yes, you're correct. Since your credit history is so young now, getting multiple cards now would reduce the hit on your AAoA in the future. Even if it's not by a big amount, it might affect which score bucket you would go into, and that would affect your scores.

If you can manage to get multiple cards without fees, and if secured cards didn't tie up too much of your money, I can see doing this. You'd probably want to plan it out very carefully, apping for the cards in a certain order according to which report they pull, so that they wouldn't get spooked by seeing a lot of inqs and new accounts. But it's definitely doable.

Closed cards should remain on your reports for 10 years, and as long as they're there, whether open or closed, they'll factor into your AAoA (and your oldest history, if they're your oldest card.) But future lenders might be more impressed by open old cards rather than by closed, so I see where you're going.

My main concern would be that you would wind up with a bunch of semi-crappy $300-$500 CL cards, and when you went for good ones, lenders might be shy of taking you on. There seems to be a mindset among lenders that no one wants to be the first to extend a card with a decent CL, other than maybe a credit union. So keep in mind what your overall credit profile is going to look like in 5 years or so, because there's more than age.

[Anonymous]

Well basically I'd be looking at getting a secured card from NFCU (no AF, minimum deposit of $500, should unsecure eventually) and.. probably something similar if I can find another CU or bank that's decent and has a low-or-no AF card that will unsecure eventually. As long as it's not a subprime lender line Orchard or CapOne, I figure the cards have the potential to graduate into something unsecured and grow over time.

But you are right, not like I want to have a whole ton of $300 CL cards sitting around forever, it'll just look bad to lenders - or so I'd imagine.