AAoA Question

[Anonymous]

My question is regarding the Average Age of Accounts. I wanted to make the wisest choice as far as adding new accounts to my profile but the last time I applied for new cards (2 to be exact in same month after my first account 1 year graduation) instead of helping my credit it immediately dropped it by 60 points and took a while to recoup after that to where it is now, so I wanted to avoid that issue this time around. I mean I see that the AAoA is a very important factor when it comes to your score but also the types of credit and number of accounts you have also play a vital role and I have been hovering in the 760 range for quite some time without any major gain and as I was reading on here, It helps to have various types of accounts to show you can manage your variable credit types wisely but in order to do so you have to open other accounts which in turn would lower the AAoA so then how is one supposed to do this while taking the least amount of hit on your credit profiles AAoA.

So I have 4 accounts total, 2 charge cards and 2 store cards. My accounts were opened on the following dates:

-Sept 2013

-Nov 2014

-Nov 2014

-Mar 2015

So I have the following questions:

1. How is the AAoA calculated?

2. Is there a rule of thumb as to a when or how often would it be prudent to add/apply for another account/card so the AAoA wont take such a hard hit?

3. I currently have only 4 hard inquiries but would like to purchase a home within the next year so would it even be wise to try to take the HI's and add accounts to my profile?

4. I already have over $22k in available credit within the 4 accounts and I am only at a 8% Credit Utility rate so would it be wise to also raise my total available credit when its high enough as it is with based on a 30-40k yearly income? Also 2 of the accounts are store cards which I hardly used and only opened to obtain new accounts when I did, so I would much rather have cards that I can use anywhere rather than be limited to a specific store.

All suggestions and or opinions are highly respected and please, I have done some limited research on the subject but wanted to hear your personal insight

[taxi818]

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@Anonymous wrote:

My question is regarding the Average Age of Accounts. I wanted to make the wisest choice as far as adding new accounts to my profile but the last time I applied for new cards (2 to be exact in same month after my first account 1 year graduation) instead of helping my credit it immediately dropped it by 60 points and took a while to recoup after that to where it is now, so I wanted to avoid that issue this time around. I mean I see that the AAoA is a very important factor when it comes to your score but also the types of credit and number of accounts you have also play a vital role and I have been hovering in the 760 range for quite some time without any major gain and as I was reading on here, It helps to have various types of accounts to show you can manage your variable credit types wisely but in order to do so you have to open other accounts which in turn would lower the AAoA so then how is one supposed to do this while taking the least amount of hit on your credit profiles AAoA.

So I have 4 accounts total, 2 charge cards and 2 store cards. My accounts were opened on the following dates:

-Sept 2013

-Nov 2014

-Nov 2014

-Mar 2015

So I have the following questions:

1. How is the AAoA calculated?

2. Is there a rule of thumb as to a when or how often would it be prudent to add/apply for another account/card so the AAoA wont take such a hard hit?

3. I currently have only 4 hard inquiries but would like to purchase a home within the next year so would it even be wise to try to take the HI's and add accounts to my profile?

4. I already have over $22k in available credit within the 4 accounts and I am only at a 8% Credit Utility rate so would it be wise to also raise my total available credit when its high enough as it is with based on a 30-40k yearly income? Also 2 of the accounts are store cards which I hardly used and only opened to obtain new accounts when I did, so I would much rather have cards that I can use anywhere rather than be limited to a specific store.

All suggestions and or opinions are highly respected and please, I have done some limited research on the subject but wanted to hear your personal insight

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There is no way adding 2 cards will drop your score 60 points. Hell adding 10 may not even do that. Not sure where you were getting your scores from to begin with. Basically guessing your oldest account is at least 2 years old. In that case You average is nearly the same. But limited info here. Anyway if you wanted a couple more with that score you would be good to go. at this point you would barely see any movement in your fico 8 score. That is with only 4 cards currently and looks like you started back in 2013. About the same time. I have 27 accounts and the most i ever lost from a new account is 2-3 points and in many cases i dont lose any. it just depends on what else is on your report. Remember Credit Age is only 15% of entire Credit score. Big flucuations come mostly from Utilization and payment history. not AAoA.

[Anonymous]

My comments below.  Best of luck!

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@Anonymous wrote:

My question is regarding the Average Age of Accounts. I wanted to make the wisest choice as far as adding new accounts to my profile but the last time I applied for new cards (2 to be exact in same month after my first account 1 year graduation) instead of helping my credit it immediately dropped it by 60 points and took a while to recoup after that to where it is now, so I wanted to avoid that issue this time around. I mean I see that the AAoA is a very important factor when it comes to your score but also the types of credit and number of accounts you have also play a vital role and I have been hovering in the 760 range for quite some time without any major gain and as I was reading on here, It helps to have various types of accounts to show you can manage your variable credit types wisely but in order to do so you have to open other accounts which in turn would lower the AAoA so then how is one supposed to do this while taking the least amount of hit on your credit profiles AAoA.

So I have 4 accounts total, 2 charge cards and 2 store cards. My accounts were opened on the following dates:

-Sept 2013

-Nov 2014

-Nov 2014

-Mar 2015

So I have the following questions:

1. How is the AAoA calculated?

There are tools out there to help you with this.  The key idea is that FICO's AAoA computation counts all accounts, closed or open.  And that even after an account is closed, it continues to age.

2. Is there a rule of thumb as to a when or how often would it be prudent to add/apply for another account/card so the AAoA wont take such a hard hit?

No, because what matters far more than a rule of thumb applying to everyone is what a particular person's plans are for needing credit in the upcoming two years, like a car or home loan.  See #3 below.

3. I currently have only 4 hard inquiries but would like to purchase a home within the next year so would it even be wise to try to take the HI's and add accounts to my profile?

No.  It would not be wise.  You have four credit cards.  These are plenty to enable you to have a high score.  My score was 842 with three cards.  Getting more cards is fine down the road, but given that you want to buy a home soon your SOLE focus should be preparing for that.  Getting more cards between now and then will lower your score and also be a red flag for underwriters.  You should working on paying your CC debt down, allowing your inquiries to drop off, etc.

4. I already have over $22k in available credit within the 4 accounts and I am only at a 8% Credit Utility rate so would it be wise to also raise my total available credit when its high enough as it is with based on a 30-40k yearly income? Also 2 of the accounts are store cards which I hardly used and only opened to obtain new accounts when I did, so I would much rather have cards that I can use anywhere rather than be limited to a specific store.

When you do apply for more cards down the road, I agree that they should be major cards and not store cards.  But right now you should not apply for any more cards and not close any either (because of the home purchase).

All suggestions and or opinions are highly respected and please, I have done some limited research on the subject but wanted to hear your personal insight

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You also write:

"It helps to have various types of accounts to show you can manage your variable credit types wisely but in order to do so you have to open other accounts which in turn would lower the AAoA so then how is one supposed to do this...."

You are correct.  Having different types of accounts does help your score.  Because you are hoping to obtain a huge installment loan in a year, it would help you to have one installment loan on your profile.  Do you have any installment loans, open or closed?  (These would be things like an auto loan, a personal loan, or a student loan.)

Final question: do you have any "negatives" on your credit reports?  That would be things like late payments, collections, chargeoffs, etc.  I am assuming not.

[Anonymous]

Taxi818:

I was going by transunion and equifax, there has been a lot of people whose credit takes a high dip for similar reasons than mine so the fact you feel its not possible, is a personal opinion and not a fact. My credit did go down from 720 to about 665 right after I opened my 2 accounts after my secured card graduated and it took about 6 months to get back to 740's. My credit profile is clean with zero negatives so it would have been nothing else that caused the drop. I would post the 7 month variance from my credit profile to prove this drop but dont feel its necessary just to prove a fact. Thanks for your input

Creditguyindixie:

i do not have any installment loans open or closed just those 4 accounts

I have zero negatives on my credit repoort all around

[taxi818]

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@Anonymous wrote:

Taxi818:

I was going by transunion and equifax, there has been a lot of people whose credit takes a high dip for similar reasons than mine so the fact you feel its not possible, is a personal opinion and not a fact. My credit did go down from 720 to about 665 right after I opened my 2 accounts after my secured card graduated and it took about 6 months to get back to 740's. My credit profile is clean with zero negatives so it would have been nothing else that caused the drop. I would post the 7 month variance from my credit profile to prove this drop but dont feel its necessary just to prove a fact. Thanks for your input

Creditguyindixie:

i do not have any installment loans open or closed just those 4 accounts

I have zero negatives on my credit repoort all around

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Well that explains everything and hence why i asked where you were getting that from. Yes. when going thru transunion or Equifax. you will get wild swings on the AAoA because first They are Vantage or Transrisk scores. Total different scoring models. and as stated already above. They don't take into account many things that the fico does. If you are truly trying to get it down focus only on the fico scores and You will notice there are not wild swings based on 1-2 or even 4 new accounts. You did get great advice when they stated you would be going for a mortgage in next couple of years. If case i would not add any new accounts and focus on mortgage only you are good already. Does not matter if store card or regular card. In the eyes of fico it is all the same. A revolver. And as long as your utilization is where it is you are doing fine. For best results below 10% is always best. But in anycase back to your point. You would be fine if you wanted to open a couple of cards. To tell you how messed up Equifax and transunion are. According to Equifax from their website. My score is 576. However my equifax fico is 719. By no means should you go by those which has different model from what the majority of lenders use. Ive yet to see a lender use the score from transunion or from equifax ever.

[Anonymous]

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@taxi818 wrote:

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@Anonymous wrote:

Taxi818:

I was going by transunion and equifax, there has been a lot of people whose credit takes a high dip for similar reasons than mine so the fact you feel its not possible, is a personal opinion and not a fact. My credit did go down from 720 to about 665 right after I opened my 2 accounts after my secured card graduated and it took about 6 months to get back to 740's. My credit profile is clean with zero negatives so it would have been nothing else that caused the drop. I would post the 7 month variance from my credit profile to prove this drop but dont feel its necessary just to prove a fact. Thanks for your input

Creditguyindixie:

i do not have any installment loans open or closed just those 4 accounts

I have zero negatives on my credit repoort all around

---

Well that explains everything and hence why i asked where you were getting that from. Yes. when going thru transunion or Equifax. you will get wild swings on the AAoA because first They are Vantage or Transrisk scores. Total different scoring models. and as stated already above. They don't take into account many things that the fico does. If you are truly trying to get it down focus only on the fico scores and You will notice there are not wild swings based on 1-2 or even 4 new accounts. You did get great advice when they stated you would be going for a mortgage in next couple of years. If case i would not add any new accounts and focus on mortgage only you are good already. Does not matter if store card or regular card. In the eyes of fico it is all the same. A revolver. And as long as your utilization is where it is you are doing fine. For best results below 10% is always best. But in anycase back to your point. You would be fine if you wanted to open a couple of cards. To tell you how messed up Equifax and transunion are. According to Equifax from their website. My score is 576. However my equifax fico is 719. By no means should you go by those which has different model from what the majority of lenders use. Ive yet to see a lender use the score from transunion or from equifax ever.

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yes, I certainly go by fico scores but didnt have access to them prior to me opening my discover account which offers free fico scores each month. I also use CK and Credit Sesame and the scores on there are identical to my fico scores (which is odd because I have seen them fluxuate from fico). 

perhaps i will just wait another few months and see where my score goes.

[taxi818]

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@Anonymous wrote:

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@taxi818 wrote:

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@Anonymous wrote:

Taxi818:

I was going by transunion and equifax, there has been a lot of people whose credit takes a high dip for similar reasons than mine so the fact you feel its not possible, is a personal opinion and not a fact. My credit did go down from 720 to about 665 right after I opened my 2 accounts after my secured card graduated and it took about 6 months to get back to 740's. My credit profile is clean with zero negatives so it would have been nothing else that caused the drop. I would post the 7 month variance from my credit profile to prove this drop but dont feel its necessary just to prove a fact. Thanks for your input

Creditguyindixie:

i do not have any installment loans open or closed just those 4 accounts

I have zero negatives on my credit repoort all around

---

Well that explains everything and hence why i asked where you were getting that from. Yes. when going thru transunion or Equifax. you will get wild swings on the AAoA because first They are Vantage or Transrisk scores. Total different scoring models. and as stated already above. They don't take into account many things that the fico does. If you are truly trying to get it down focus only on the fico scores and You will notice there are not wild swings based on 1-2 or even 4 new accounts. You did get great advice when they stated you would be going for a mortgage in next couple of years. If case i would not add any new accounts and focus on mortgage only you are good already. Does not matter if store card or regular card. In the eyes of fico it is all the same. A revolver. And as long as your utilization is where it is you are doing fine. For best results below 10% is always best. But in anycase back to your point. You would be fine if you wanted to open a couple of cards. To tell you how messed up Equifax and transunion are. According to Equifax from their website. My score is 576. However my equifax fico is 719. By no means should you go by those which has different model from what the majority of lenders use. Ive yet to see a lender use the score from transunion or from equifax ever.

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yes, I certainly go by fico scores but didnt have access to them prior to me opening my discover account which offers free fico scores each month. I also use CK and Credit Sesame and the scores on there are identical to my fico scores (which is odd because I have seen them fluxuate from fico). 

perhaps i will just wait another few months and see where my score goes.

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set scores aside.

First. Ck is good for 1 thing and 1 thing only. Looking at items on your actual report. Everything else is basically useless.

That is not your real AAoA from Credit Karma. As i said it is a different model. Even their scores are useless.

You Discover score is your true Fico score. for transunion. But does not give you AAoA and other essentials for you to understand properly.

No way would you have a 60 point drop ever because of 2 new accounts. Unless you are looking at credit karma.

Remember. many Credit scores out there. Its up to you to look thru the fog and mess and understand what is what.

]Focus simply on your 3 Fico scores and well as complete reports. You can get them for free from annual credit report but of course you will have to pay to get accurate information.

The 3 credit bureaus themselves created vantage as not to pay for fico scores.

So only thing you need is to understand.

If you wanted to do it on the cheap. The best is to sign up for Experian at about 995 a month. Although its only 1 report and score. But you will see you AAoA and everthing.

or you could pay the 30 here which most of us do here at myfico and see all 3. The problem is your report does not update but every 3 months here. But your scores update daily.

This will eliminate all your confusion. As stated. ignore what Ck is telling you. I lost a 100 points on Ck because i closed an account. Which was in good standing. Which told me it was total BS. did not lose a single fico point. Which with 90 plus percent of lenders using is all you need to focus on. Good luck if you add a couple cards. You would be good to go no matter what you decide to do. and you will notice your Discover score may go up. Because a new card would lower your utilization.

[Anonymous]

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@Anonymous wrote:

i do not have any installment loans open or closed just those 4 accounts

I have zero negatives on my credit repoort all around

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Hey George!  Glad to hear you have no negatives.  That will help you out a lot as you get closer to the home purchase.

The one thing that will help you out a great deal is adding one installment loan.  The clever trick people have discovered here is to add a $500 Share Secure loan, and then pay most but not all of it off.  It's a huge help if you are a person who has never had an installment loan before.  Let me know if you want to know more about how to do that.

[takeshi74]

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@Anonymous wrote:

I wanted to make the wisest choice as far as adding new accounts to my profile but the last time I applied for new cards (2 to be exact in same month after my first account 1 year graduation) instead of helping my credit it immediately dropped it by 60 points and took a while to recoup after that to where it is now, so I wanted to avoid that issue this time around.

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Be careful assuming that the wisest choice is to never have your scores drop.  You certainly don't want to tank your scores when seeking new credit but you also can't expect to have no drop at all.  It's tricky to provide advice as impact of new credit all depends on one's credit profile and the details of the new account.

If your first card had just hit the 1 year mark then your credit profile was in a shape where it could only add so many new accounts since it was thin.  If you're up to 3 cards now you won't necessarily see the same impact that you did back then when you only had one card that was 1 year old.

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@Anonymous wrote:

I mean I see that the AAoA is a very important factor when it comes to your score

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Typically ~15% but don't overlook the other 85%.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

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@Anonymous wrote:

I have been hovering in the 760 range for quite some time without any major gain and as I was reading on here

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Also don't assume that your scores will increase in a linear fashion.  It's more of a curve and it gets more difficult as you move up the curve.  Assuming that score is a FICO 8 (always consider specific scoring model and CRA when referencing scores) you're in the range for best terms and you won't see massive improvements.  The big improvements come from addressing any deficiencies with your credit profile that are major factors.  At 760 with FICO 8 don't expect major gains.  You're left with relatively small factors to work on and they will result in relatively small gains.

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@Anonymous wrote:

but in order to do so you have to open other accounts which in turn would lower the AAoA so then how is one supposed to do this while taking the least amount of hit on your credit profiles AAoA. 

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I say it's not just a matter of time over and over, however, AAoA and credit just take time to build.  There are no quick and easy fixes.  Unless you're constantly applying your AAoA will improve over time and as your profile thickens.  As you get more accounts you'll see less of a hit from the new accounts that you add.  Right now you're just over 2 years total history.  That may sound like a long time to you but you're just starting out in the credit world.

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@Anonymous wrote:

How is the AAoA calculated? 

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Just like any other average.  You add up all the amounts and then divide by the number of amounts.  As indicated above, your AAoA includes closed accounts on your reports as well.  Some find it easier to convert account ages into months, average the months and then convert back into years and months.  As stated above, there are online calculators and you can use a spreadsheet like Excel (which has functions for date math, aveaging, etc).  IIRC new accounts are not calculated by FICO models with an age of 0 but an age of 1 month minimum.

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@Anonymous wrote:

Is there a rule of thumb as to a when or how often would it be prudent to add/apply for another account/card so the AAoA wont take such a hard hit? 

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No need.  Just do the before and after math to determine impact to your AAoA from adding a new account.  It would be difficult to create a useful and meaningful rule of thumb that covers every possible permutation of existing AAoA and number of new accounts.

That said, AAoA is 15%.  Don't obsess over one factor while overlooking the others.

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@Anonymous wrote:

I currently have only 4 hard inquiries but would like to purchase a home within the next year so would it even be wise to try to take the HI's and add accounts to my profile?

I don't see any signficant benefit but you might be able to add another account right now if you're 1 year out.

You're already above the generally suggested 2-3 minimum number of revolvers.  You're already in the 740-760 FICO 8 range for best terms.  Your mortgage scores will be lower numbers but that's just a different interpretation of your credit profile.

You may want to pull those scores from myFICO and see if you can get info on qualification tiers based on mortgage score from the mortgage lender you intend to use.

Are you thinking of adding an installment?  Take a look at the size of the Mix of Credit slice in the link I posted above.

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@Anonymous wrote:

I already have over $22k in available credit within the 4 accounts and I am only at a 8% Credit Utility rate so would it be wise to also raise my total available credit when its high enough as it is with based on a 30-40k yearly income?

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What do you see as the benefit from higher total limits?  Which factors would you improve?  What is the significance/impact of those factors?  What factors would be adversely impacted for you?

Again, I don't see any significant gains.  If you're at 8% reported revolving utilization each % drop is going to provide a small benefit at best.  Additionally, you can drop your reported revovling utilization even without CLI's or new accounts.  Pay down your revolvers just prior to their report dates.  You can tweak reported balances to where you only have 1 reporting at 1% and see the scoring impact to see if it's worthwhile to you.

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@Anonymous wrote:

yes, I certainly go by fico scores but didnt have access to them prior to me opening my discover account which offers free fico scores each month. I also use CK and Credit Sesame and the scores on there are identical to my fico scores (which is odd because I have seen them fluxuate from fico). 

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FICO's are always avaialble from myFICO and other sources as well.  Do not rely on a score generated by one model to detemrine a score generated by another model.  Two models can certainly produce similar or even the same numbers in a given situation but you cannot assume that is always the case for all situtations.  Variance and trending are not fixed between different models as there is no causal/dependent relationship between different models.  Different models use different algorithms that evaluate report data differently and can even have different point ranges.  If, for example, you want to know what your TU FICO 8 is then you have to get a TU FICO 8.  You cannot use a TU VantageScore 3.0 or even another FICO.

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@taxi818 wrote:

First. Ck is good for 1 thing and 1 thing only. Looking at items on your actual report. Everything else is basically useless.

That is not your real AAoA from Credit Karma. As i said it is a different model. Even their scores are useless. 

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Do not rely on oversimplifications like this.  Always consider the relevance of a scoring model/CRA combo to a given creditor.  A TU VantageScore 3.0 (one of the scores that CK provides) is certainly irrelevant to a creditor that does not use that score.  However, there are creditors that use VantageScore.  If you know you have a creditor that uses one of the VantageScores provided by CK then CK's scores are not useless.  I don't so the CK scores are useless to me and I only use CK for report data.

People seem to tend to assume that usefulness, accuracy, etc is all about how well a score mimics FICO 8 but that is not the case.  There are many scoring models used by creditors and even with FICO there isn't just one scoring model (see also the Understanding FICO Scoring subforum and its stickies).  Even with FICO you have to consider specific scoring models as that will have an impact on the number generated.  There would be no point to the various FICO models if they all assess report data identically..  To go back to the TU FICO 8 example, that particular score won't mean anything to a creditor that uses a different FICO model and/or CRA.

That said, you do want to consider that FICO includes closed accounts in AAoA whereas CK only considers open accounts and actually provides AAoOA, not AAoA.