AAOA Scoring Method

[cem13]

Hi Guys/Gals,

I found something very interesting that may or may not be true.  I have cleaned up my file since my BK7 in JAN2011.  Each year, though GW or other methods, I have slowly and I mean SLOWLY; but surely, improved my file.  The kicker:  my scores have NOT improved.

My 3B yearly cycle in in March of each year.  This year on New Year's Day, I pulled my Annual Credit Report just to compare.  In MAR16, I was showing 1-30 day late and 1-60 day late from 2009.  It aged off this year without any changes in scoring.  This confirms what the TU Supervisor told me a few years ago.  That is, if an account is flagged as negative, it is scored for 2 years since the DOFD, then it is no longer scored as negative.  I have been range bound on my scores for about 4 years now (+/- 8 points) depending on my CC utilization.

My overall AAOA has increased steadily as the closed accounts prior to BK7, have aged off.  My new accounts since BK7 have improved month over month.  In other words, as 1 or 2 accounts dropped at the 10 year level, my 10 new CC and intallments accounts are aging.

I looked at the factors and my reported AAOA is 4 years.  So I put a spreadsheet together and they are tracking my OPEN accounts.  My closed accounts are not factored into my reported AAOA.  

So my question is, what evidence does anyone have that the scoring model uses closed accounts in the AAOA?  It is possible that the CRAs report the AAOA of open accounts while using the closed accounts for scoring purposes.  However, I am starting to think that the closed accounts may NOT factor into the scoring.

I have read through about 20-30 threads on the subject here and on other baords and the conventional wisdom is that all accounts listed on the report is averaged for scoring purposes.  However, I could not find one single piece of evidence of this being true.

I am now starting to think that only the open accounts AAOA is used for scoring.  Thoughts?

[Anonymous]

Mine uses closed accounts.....so not sure.....maybe u are in a different bucket

[rooeez]

My FICO 08 scores use open and closed accounts. My Vantage 3.0 scores use only open.

http://www.myfico.com/credit-education/whats-in-your-credit-score/

States average of "all" accounts.

[Anonymous]

When you say....

I looked at the factors and my reported AAOA is 4 years.  So I put a spreadsheet together and they are tracking my OPEN accounts.  My closed accounts are not factored into my reported AAOA.  

... what tool are you using to check your AAoA?  If it is Credit Karma, they are well known for having an incorrect summary page for age related scoring factors.

FICO and Vantage are the two dominant players in the credit scoring world.  Both count closed and open accounts together in their age related factors, whether AAoA (Average Age of Accounts) or Age of Oldest Account.

[rooeez]

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@Anonymous wrote:

FICO and Vantage are the two dominant players in the credit scoring world.  Both count closed and open accounts together in their age related factors, whether AAoA (Average Age of Accounts) or Age of Oldest Account.

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I do remember someone stating that Vantage 3.0 scores do take into account open and closed accounts as well, but for some reason Credit Karma uses an outdated algorithim that still only uses open accounts. I checked Credit Sesame, also Vantage 3.0) and it is in line with my FICO AAoA, so I stand corrected. Thanks.

[cem13]

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@Anonymous wrote:

When you say....

I looked at the factors and my reported AAOA is 4 years.  So I put a spreadsheet together and they are tracking my OPEN accounts.  My closed accounts are not factored into my reported AAOA.  

... what tool are you using to check your AAoA?  If it is Credit Karma, they are well known for having an incorrect summary page for age related scoring factors.

FICO and Vantage are the two dominant players in the credit scoring world.  Both count closed and open accounts together in their age related factors, whether AAoA (Average Age of Accounts) or Age of Oldest Account.

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I am not using any tool except for MS Excel to calculate the average age of account based on my CRs.  I do not count the month that the account was opened regardless of what date it is opened.  In other words, I age an account open on the 1st of the month the same as an account opened on the 31st of that same month.

This might not be how it is actually calculated but my manually calculated AAOA.  However I think it is a mute point becuase the AAOA as reported by the CRAs is the same.  The difference is that the AAOA that is reported by the CRAs match my AAOA of my OPEN accounts, not ALL accounts.

So the AAOA as reported to consumers may not be the AAOA calculated in the scoring.

[cem13]

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@rooeez wrote:

I do remember someone stating that Vantage 3.0 scores do take into account open and closed accounts as well, but for some reason Credit Karma uses an outdated algorithim that still only uses open accounts. I checked Credit Sesame, also Vantage 3.0) and it is in line with my FICO AAoA, so I stand corrected. Thanks.

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This supports my theory.  The scoring by FICO is calulated by what the CRAs gather in the file and report.  In other words, FICO is the formula based on what inputs are given to them.

[cem13]

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@rooeez wrote:

My FICO 08 scores use open and closed accounts. My Vantage 3.0 scores use only open.

http://www.myfico.com/credit-education/whats-in-your-credit-score/

States average of "all" accounts.

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Thanks for the link.  I read it and I am certainly not convinced by the wording.  Maybe I am reading too much into it, like a lawyer, but it does not explicitly say all accounts OPEN AND CLOSED.  

If they only used open accounts, the statement could still hold true.  For example, "Yes, we use all accounts,.........that are open"

[cem13]

The other point that is true for me is that any account reported as negative, only calculates as negative for the first 2 years.  Then after the 2 years, it is not judged as negative for scoring.  

I am not certain if such an account is calculated into the AAOAs yet.  

[rooeez]

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@cem13 wrote:

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@rooeez wrote:

I do remember someone stating that Vantage 3.0 scores do take into account open and closed accounts as well, but for some reason Credit Karma uses an outdated algorithim that still only uses open accounts. I checked Credit Sesame, also Vantage 3.0) and it is in line with my FICO AAoA, so I stand corrected. Thanks.

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This supports my theory.  The scoring by FICO is calulated by what the CRAs gather in the file and report.  In other words, FICO is the formula based on what inputs are given to them.

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Yes, each CRA can only calculate a FICO based on the specific information/accounts in their report. For instance, TU always reports the open date as the 1st of the month, whereas EX and EQ report the actual day. So, the AAoA is off, but all three still use all accounts, not just open.