AAoA and AoYA vs credit inquiry

[Anonymous]

So I did a small mistake which brought my credit score down by 4 points. 

3 months back I opted in to allow paylease to report my monthly payments to EX and TU. I thought it wasn't going to hurt my credit as there won't be a hard pull and it will help my CR with timely payments. Instead it brought my AoYA down from 3.1 years to 0 and AAoA to 3.6 years. 

So a 4 points hit just for adding a new account. If it was a hard inquiry + new account, should I expect my score to drop 7+ points? considering HP usually costs 3 points + 4 points for new accounts?

I talked to paylease and they want to help me to get rid of the account from credit reporting but I am not sure if I should do that or should I just let it age by 1 year?

[HeavenOhio]

Where would your AAoA be without PayLease? How many other open and closed accounts do you have on your report?

My gut says that if PayLease will remove the account, that might be the way to go. Reporting rent is great for those with young and thin files because it positions them to get more credit. It seems that you probably don't need that.

7 points for a hard inquiry and a new account seems reasonable, although the hit the next time around may be different because your AoYA is already at zero. Also keep in mind that the hard inquiry would likely be on only one bureau while the new account would be on all of them.

[Anonymous]

My bad, my AAoA is now 3.4 years, down from 3.9

Yeah, I talked to the paylease CSR and they are willing to help. I think you are right, I should seek that option since it is available to me. 

Also, I am trying to figure out how someone's rental payments affect their CR since it shows as carrying a balance every month with 1 month terms. 

[Anonymous]

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@Anonymous

So a 4 points hit just for adding a new account. If it was a hard inquiry + new account, should I expect my score to drop 7+ points? considering HP usually costs 3 points + 4 points for new accounts?

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There is no way to quantify without testing your specific profile what the impact would be of an inquiry/new account.  There are people that can lose 0 points from an inquiry and new account, while there are other people that can lose 10-20+ points.  It all really depends on the profile in question.  If someone is adding an inquiry that's in the same bin, say, going from 3-4 on their report if 3 and 4 are "binned" together, there would be no score drop from the inquiry.  If their AoYA was 1 month and it drops to 0, that wouldn't adversely impact score either and if their file is thick and their AAoA doesn't cross a threshold it wouldn't cause a score drop.  Conversely, you can have someone that goes into a new inquiry bin, their AoYA drops from 5 years to 0 months and their AAoA drops from 5 years to 2 years because their file is super thin with only 1 other account and they could see a pretty intense score drop.

[beutiful5678]

Personally, I would keep the PayLease account on my credit report for a few reasons:

1) The drop was only 4 points which is insignificant considering scores range 300-850 (and some of that drop is likely due to the new inquiry which won't change if the account is removed).

2) This likely improves your credit mix as I suspect it is reporting as an "other" account.

3) Your AAoA only dropped 1/2 a year or so. Furthermore, as this account ages it will make your AAoA more robust. This will help you down the line when you apply for important, expensive stuff like an auto loan or a mortgage loan (loans where the interest rate actually matters). For example, my Stafford student loans went from one servicer to another a few years ago when I was not paying attention at all to my credit. Unbeknownst to me, a new account was created for each loan (and I had multiple loans because each semester was a separate loan until they were consolidated by Great Lakes). So now I have 28 different student loan accounts on my report with an AAoA sitting at 7.6 years. In December I started caring about my credit again, got 4 credit cards, and my AAoA barely moved at all. Basically, the more accounts you have, the less your AAoA will decline when you get a new account.

4) Based on your comment history it sounds like you're rebuilding. With PayLease reporting your payments you get credit for the on-time payments that you make - you're creating positive history.

[Anonymous]

You refer to the new rental info affecting your "score" -- but I don't think you mention what kind of score it is.  If it was a FICO 9 or a VantageScore, then that makes sense, since both of those scoring models were designed to consider rental info.

FICO 8 is not supposed to be affected by rental info.  I just scanned through a half dozen articles on the web and they all say the same thing: only FICO 9, FICO XD, and VantageScore.

What kind of score was it and where did you get it from?

How does the rental account appear on your reports?  Does it indicate that it is rent?  Does it have an account type?

Do you have any installment accounts aside from this rental account?

[Anonymous]

Yes it's FICO 8 and it is reported to both TU and EX. I get my daily credit score updates from EX and monthly TU from Discover. 

The account type on both TU and EX is reported as "Other" and yes, it does mention that it is a rental agreement. 

Yeah I do have student loans as my installment account, but PayLease doesn't show up as installment account but just "other account". Account shows monthly rental payments which never goes down to 0 even after making the payments, it always shows a balance of $1200. 

I don't think carrying a balance is helping me, since when I look at my "credit and retail debt" it shows a debt of $1200 (real estate debt) + my student loans. 

So I am not sure I took a 4 points hit because of AAoA, since it only went down by a few months, still above 3 years mark which is pretty good. I really think, it's because of the $1200 balance I am carrying every month.

Probably the only benefit here is monthly on time payments, that's the only thing PayLease report to the bureaus.

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@Anonymouswrote:

You refer to the new rental info affecting your "score" -- but I don't think you mention what kind of score it is.  If it was a FICO 9 or a VantageScore, then that makes sense, since both of those scoring models were designed to consider rental info.

FICO 8 is not supposed to be affected by rental info.  I just scanned through a half dozen articles on the web and they all say the same thing: only FICO 9, FICO XD, and VantageScore.

What kind of score was it and where did you get it from?

How does the rental account appear on your reports?  Does it indicate that it is rent?  Does it have an account type?

Do you have any installment accounts aside from this rental account?

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[Anonymous]

I think what we may be learning is that, in practice, adding rental accounts to your report will never help your FICO 8 score, since the model ignores the payment history in a positive rental tradeline: only VS, FICO 9, and FICO XD are designed to give a consumer a boost here.  But the new tradeline can damage AoYA or AAoA.

Thus the only possible outcomes in FICO 8 are nothing or harm. 

For FICO 9 there might be unquivolcal value, though is likely achieved better through SS loans and other conventional strategies.

[Anonymous]

And since it's going to take a while for FICO 9, I think it's not worth it to report rental payments.

It only benefits someone with no monthly payment hisroty. 

And it hurts someone who is established, since it always shows that you are carrying a balance. Carrying a balance every month of $1200 is not how FICO 8 works. Not to mention AoYA.

Thanks Dixie, I am going to opt out of the service and going to ask for a complete removal of the account. I will post once it is done and how it affects my score.