New Account Penalty for Mortgage Scores?

[Anonymous]

I am thinking of applying for a mortgage in the next several months, but I also plan to apply for a credit card right now. I currently have no new account in the last 12 months. I have read that the new account penalty is a factor for FICO 8. But is there a new account penalty for FICO 2, 4, & 5 mortgage scores? If so, how much impact does it have?

My Experian FICO 2 is 831 and my FICO 8 is 800. If there is any risk whatsoever of falling under a threshold such that I don't get the best possible mortgage rate from a lender, I would like to avoid getting the new credit card. Do you think I am overwhelmingly safe to get the card? I just don't know how much this would affect the FICO 2, 4, & 5 compared to FICO 8.

[Mortgage-Specialist]

It will have zero negative impact

[thornback]

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@Mortgage-Specialist wrote:

It will have zero negative impact

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Just to clarify--- It may have zero negative impact in your ability to be approved for a mortgage since your scores are already top tier -  however, moving from a 'no new accounts' to a 'new accounts' scorecard will almost certainly result in a score drop (to the tune of 15-30 points, depending on profile). Granted, even under the worst case score drop scenario,  you'd still fall within the top tier for best rates.

If you're concerned about presenting the best possible credit profile, you may want to just wait til your mortgage process is complete to apply for a new card.  

[Mortgage-Specialist]

Most lenders these days consider any score 740 and above the very highest tier. There might be some lenders that consider 760 and above the highest tier.. 

I don't see these reductions in scores from a single pull but with Thornbacks response, it does sound possible. 

[thornback]

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@Mortgage-Specialist wrote:

Most lenders these days consider any score 740 and above the very highest tier. There might be some lenders that consider 760 and above the highest tier.. 

I don't see these reductions in scores from a single pull but with Thornbacks response, it does sound possible. 

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I dont think it will affect OPs ability to obtain top tier rates - I agree with you on that point. But OP specifically asked about new accounts and scoring so really just wanted to add that 'new accounts' caveat so they know what to expect 😊

Also, the score reduction discussed wouldn't be from a single credit pull -  it's based on the movement from one FICO scorecard to another (no recent accounts → recent accounts). Inquiries weren't even considered in the potential point loss estimate mentioned, but could be an additional factor.

[barca]

apart from new account , don't underestimate the inquiry

since you already have high scores no big deal.

New account + inquiry will definitely make you lose points.

When my 2 inquiry was removed (1 year mark) - I gained 11 points on EX 2 (802 to 813)

[thornback]

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@barca wrote:

apart from new account , don't underestimate the inquiry

since you already have high scores no big deal.

New account + inquiry will definitely make you lose points.

When my 2 inquiry was removed (1 year mark) - I gained 11 points on EX 2 (802 to 813)

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This ^^  and again, OP,  these score drops are profile dependent.  We can only guess or advise of the average drop for particular actions - what actually happens on your profile may differ.  You may only see a 5 points loss for an inquiry- we just don't know so...  err on the side of caution.

[Anonymous]

Don’t forget the drop in average age of accounts and average age of revolving accounts. But again with your scores, you’re still going to be in top-tier range. But it’s still a better look not to have a recent account when you go for the mortgage. As a matter of fact, I would get the cards as soon as the mortgage went through but before it reported. Jmho, unless there’s a reason you need it now.

[Anonymous]

Also since you asked, yes new accounts are a thing in the mortgage Scores as well, but the threshold is higher. In other words, you’re penalized much longer. Data points are indicating maybe 17 months for Experian and we are still seeking data points on the other two bureaus and confirmation on the first.

@thornback explained scorecard change well above. 

[Anonymous]

I should also note another difference potentially. It appears that maybe all new accounts including loans may reassign you to a new account scorecard on the mortgage scores.

So the question may be: what's the age of your youngest account? But, that hasn't been confirmed yet, so the question may be: what is the age of your youngest revolver, as it is on 8/9.

but 12 months is not gonna be the threshold for the mortgage scores, that's at least 17 months, maybe more. so OP may or may not be in a new account scorecard already, depending on when the youngest account and revolver were opened and depending on what that segmentation threshold is. 

It has to be between 17 and 24 months and I'm thinking maybe it's 18, but we will soon know. I wish we had more members contributing data points, so we could learn sooner.