@Anonymous wrote:
My Amex charge card just reported on my credit and it took a 9 point drop. Not sure why there is a drop. I am new to credit and was hoping my credit would improve if a new card reported on my credit?
Could someone please explain the reason for the drop?
We can provide some generalizations but we can't specifically address why your score dropped. You need to carefully review reports from before and after the scoring change to determine the cause(s).
It's not unusual for new accounts to cause a score drop. Consider the standard factors and what happens with a new account.
http://www.myfico.com/crediteducation/whatsinyourscore.aspx
A new account drops Average Age of Accounts (AAoA) which falls under Length of Credit History. Impact to AAoA from a new account all depends on one's AAoA. It's an average (total age of all accounts / number of accounts) so you can calculate how your AAoA would be affected. If you don't want to do the math you can use a spreadsheet and date functions to calculate. There are also online AAoA calculators that you can use. Generally speaking, those with more and older accounts will see less of an impact than those with fewer and newer accounts.
Applying for a new account typically involves a hard pull which falls under New Credit. Impact of a hard pull can vary depending on credit profile. A hard pull generally has little impact but one with a thin credit profile and/or a credit profile with issues may see a bigger impact.
Having a new account report can also have an impact which also falls under New Credit. A given profile will only handle so many new accounts before the credit seeking activity is seen as a significant risk. How many new accounts really depends on one's credit profile.
That said, it is possible in certain conditions to have scores improve because of a new account. All factors matter in scoring. If, for example, a new account significantly reduces revolving utilization it may provide a larger positive effect. Revolving utilization falls under Amounts Owed. I would guess that there were both positive and negative factors in your case and that their net effect was the 9 point difference that you saw but there could also have been other changes at play in your report. Again, we can't determine without acutally comparing your reports.
Don't just assume what should happen. Make sure you read up on how credit is assessed before setting your expectations. 9 points isn't much of a change. If you're going to fixate on the numbers then set a higher threshold. I'd suggest at least 9 points. Your scores can fluctuate just from changes to revolving utilization from one cycle to the next. I'd recommend focusing on the data in your reports versus just fixating on the numbers. You'll want to have that understanding in your toolbox anyway. Don't overlook the Understanding FICO Scoring subforum and its stickies as a resource as well as prior discussions.
