is it a good idea?

[nothingman02]

I have an Orchard secured card for $200 opened in January when I started rebuuilding my credit and did not know much about the card. I know now and the fact that This card will never grow or unsecure.

I was playing with the HSBC prequalification link and was prequalified for a Platinum mastercard and when I applied for it, was denied on the basis that it has been less than 18 months since I was 'APPROVED AND ACCEPTED' a card from HSBC. Apparently, there is no time constraint if one is denied.

I was concerned with the hard inquiry and just called recon and she told me that they have my credit report on file for 60 days and if I went ahead and closed this orchard secured card, there would not be another hard pull and I would be able to obtain that platinum MC which I was prequalified for. 

I was wondering;

1) Is it a good idea? My orchard secured is only 2.5 months old and will not hurt my AAoA so much. But for the next few years, the card will grow and there could also be CLIs.

2) What if I close this one and the I am also denied for the platinum card I was prequalified for?My credit report is the same if not better since the app and nothing should happen but one never knows and I dont want to end up with no cards. She says it is fine and I will be approved and she would not even do a hard inq and will simply recon. But I am a little concerned and wanted to get opinion/guidance from this forum as I am sure there have been folks in similar situations with orchard and HSBC.

Thanks

[Anonymous]

When you added the secured card, your AAoA took a hit.

When you add a new account, it will take another hit.

While the secured card may not grow with you, it will serve its purpose, which is to help you rebuild. It counts in your util, it counts in your mix of credit, etc.

The CL is only a factor in scoring when it comes to util calculations. So, as long as you keep a low balance or no balance, the CL won't hurt you, the same as a high CL wouldn't help you.

IMO, I say leave it be and continue rebuilding and let the secured card age. You took the hit for it already.

[nothingman02]

Hmm...Iam trying to understand.

Lets consider my 2 cards 3 months old each

AAoA = 3 months

AAoA after 1 year = 1 year.

If I cancel and get a new card

AAoA = (3m+3m+0) / 3 = 2 months

AAoA after 1 year = 3m+1year +9m = 2/3 =0.75 years

So AAoA is going to take a hit for sure. But by how much? 35% is Utilization and I would have much better utilization after an year with a modest cli on the preapproved but denied card.say I get a 250 card and after an year, it graduates to 500 or 600 and I keep a zero balance when it counts.Will I not have a better score then? I mean I am not able to understand how much of an impact this AAoA wil have.Also I havent considered that I may apply for new accounts. Plan is to app for BOA platinum(hoping for a 99/500 atleast) and cap 1 (after receiving pre app) by the end of summer or mid fall this year and then nothing till sum or fall of next year.

Message Edited by nothingman02 on 03-19-2009 02:32 PM

[Anonymous]

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nothingman02 wrote:

Hmm...Iam trying to understand.

Lets consider my 2 cards 3 months old each

AAoA = 3 months

AAoA after 1 year = 1 year.

If I cancel and get a new card

AAoA = (3m+3m+0) / 3 = 2 months

AAoA after 1 year = 3m+1year +9m = 2/3 =0.75 years

All accounts are included in AAoA, not just revolving accounts. Every account that is reported in the accounts section of your report. Not those appearing in the collections section.

So AAoA is going to take a hit for sure. But by how much? 35% is Utilization and I would have much better utilization after an year with a modest cli on the preapproved but denied card.say I get a 250 card and after an year, it graduates to 500 or 600 and I keep a zero balance when it counts.Will I not have a better score then?

Not really....util is figured by balance/CL. $0/$200 = 0%, $0/$600 = 0%. As long as you have a $0 balance, your util for the card will be 0%, no matter the CL.

I mean I am not able to understand how much of an impact this AAoA wil have.Also I havent considered that I may apply for new accounts. Plan is to app for BOA platinum(hoping for a 99/500 atleast) and cap 1 (after receiving pre app) by the end of summer or mid fall this year and then nothing till sum or fall of next year.

Message Edited by nothingman02 on 03-19-2009 02:32 PM

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Message Edited by sidewinder on 03-19-2009 04:39 PM

[nothingman02]

Not really....util is figured by balance/CL. $0/$200 = 0%, $0/$600 = 0%. As long as you have a $0 balance, your util for the card will be 0%, no matter the CL.

Er..sorry my mistake. I would not keep the balance 0 but say $5.00. Definitely not zero is I want to make the CL count. So higher CL will help in that way. And it counts 35%. Anassumption here that 0% is not as good as 9% and more available credit also helps

But AAoA, how much of an impact does it have ? Lets ignore everything else for the sake of discussion and assume all I have is those two cards. 

Well, even if I have to consider everything else on my report, its not a whole lot.

CITI - 11/04 to 11/06 closed paid current Age = 2 yrs

CHASE -  11/04 to 11/06 (closed delinquent/derog) AAC bought it and is handling it from 01/09. Age = 2 yrs

Message Edited by nothingman02 on 03-19-2009 03:14 PM

[Anonymous]

Right, it is better to have some util %, rather than 0%. However, that is talking about your overall util, not meaning each card must leave a balance reporting. Higher CL only help if you are planning on carrying high balances.

I can't give an exact effect that AAoA has on score, but enough that you get a positive/negative factor when it is helping/hurting you when you pull your reports/scores here.

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nothingman02 wrote:

Well, even if I have to consider everything else on my report, its not a whole lot.

CITI - 11/04 to 11/06 closed paid current Age = 2 yrs

CHASE -  11/04 to 11/06 (closed delinquent/derog) AAC bought it and is handling it from 01/09. Age = 2 yrs

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You begin counting age when the account is open and continue counting it, even after closed.

Citi- would be 52 months

Chase - would be 52 months

Two cards opened in Jan 2009 - 3 months each for a total of 6 months

Total number of accounts 4

AAoA = (52+52+3+3) / 4 = 110/4 = 27.5 months

Add a new account this month and you increase # of accounts by 1, increase total age by 0, so

AAoA = 110/5 = 22 months

You lose 5.5 months on AAoA, decrease AAoA from just over 2 years to below 2 years.

Add 2 more accounts later in the summer. Let's say you add a new this month also and it ages until July, give you 5 months of history.

Total age = 110 + 5 = 115 months

# of accounts = 7 accounts

AAoA = 16.4 months

[nothingman02]

Hmm..from 27.5 to 16.4 months if I open 3 cards and close 1.

I can just sit tight now and hope for good offers after 1 year or apply for these 3 cards, and exploit the UTL and CL and try and offset the damage done by the AAoA? It would be hard to figure that as AAoA impact seems to be fuzzy.

However I am surmising, given the importance attached to AAoA that it is a significant factor and especially when approving new CCs. I am going to give it some thought though and research some more on AAoA. I really want to swap Orchard for anything already! lol..

[nothingman02]

Making an excel sheet for AAoA simulation. But I am not closing my orchard. I totally forget that I had acccepted a spiegel card! I wanted a store mix!

I will unsock that spiegel once every 4 or 5 months.