AAoA and credit score...How Important??

[veracious]

Sorry for the long post,but here goes:

My recent Transunion report  from My FICO lists two negative factors affecting my score.

    1.  "There is no recent activity on your revolving accounts.

    2.    You have a short credit history.

        Note: Oldest account  11yrs 6mo.  AAoA   6years.   I have one open car loan with scheduled payments

                       remaining for one year & no other open accts.

According to my calculations of AAoA if I open  1 new CC  my AAoA will drop to 61months.

If I open 2 new CC's it drops to 52 months.              Should I let  AAoA grow to 7 years without

opening new CC's or will my FICO score suffer drastically . I plan on purchasing a home next year.

 Any advice is greatly appreaciated.  Thanks

[MarineVietVet]

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@veracious wrote:

Sorry for the long post,but here goes:

My recent Transunion report  from My FICO lists two negative factors affecting my score.

    1.  "There is no recent activity on your revolving accounts.

    2.    You have a short credit history.

        Note: Oldest account  11yrs 6mo.  AAoA   6years.   I have one open car loan with scheduled payments

                       remaining for one year & no other open accts.

According to my calculations of AAoA if I open  1 new CC  my AAoA will drop to 61months.

If I open 2 new CC's it drops to 52 months.              Should I let  AAoA grow to 7 years without

opening new CC's or will my FICO score suffer drastically . I plan on purchasing a home next year.

 Any advice is greatly appreaciated.  Thanks

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I think the key is your plan to buy a home next year. It seems the recommendation of most folks is not to apply for new credit within a year (I think? could be wrong about that) of trying to obtain a mortgage. Hopefully others with more knowledge of this will chime in.

From a BK years ago to:
9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

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[smallfry]

What is your score? EQ too since I think that MIGHT be closer to what a lender will pull for you. No idea how many OPEN credit cards you have. If more than 2 let  1 credit card report a balance of less than 5% of the total credit limit and all others report 0 . If I was going to be getting a mortgage I would not get a credit card. Got more info?

[veracious]

Thanks marinevietvet  and  smallfry for your prompt response.

Smallfry ,    I didn't know my present scores had anything to do with it.

Please let me know why they do.

I don't have any open CC's, as I mentioned ,  they are all closed.

I only have an open installment (car loan) set to close in one year at payoff.

My greatest concern is:  how long can my FICO scores stay as they are    without opening new lines of credit ?

Anyone have a similar experience?

Thanks

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 EQ-761   TU-747    EX-???

[smallfry]

No credit cards? I would apply for 1 now. If you get a decent approval I would go for another immediately.

[veracious]

           Thanks for the response, smallfry.

What about my mortgage next year?  Won't  a lender look at a one year old account negatively?

Since you brought it up, could you please explain how my score might be a factor?

I need to learn all I can about  credit scoring, please enlighten me. I appreciate everyone's input.

MY FICO has taught me a lot!!

      veracious

[smallfry]

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@veracious wrote:

           Thanks for the response, smallfry.

What about my mortgage next year?  Won't  a lender look at a one year old account negatively?

Since you brought it up, could you please explain how my score might be a factor?

I need to learn all I can about  credit scoring, please enlighten me. I appreciate everyone's input.

MY FICO has taught me a lot!!

      veracious

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If you are applying in one year I would not be concerned. I think 1 or 2 one year old credit cards would be fine with an underwriter. 

[Anonymous]

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@smallfry wrote:

No credit cards? I would apply for 1 now. If you get a decent approval I would go for another immediately.

---

I would do the same.  You will see a score increase when you open a credit card, with an even larger increase if it's a bank/national credit card.  DH went up 26 points when he opened his first CC, and I gained 20 points.  FICO EQ for both of those score increases.  We are rebuilders, so we had previously opened and closed cc's showing on our reports.

If you open two accounts, and PIF, then you will have a balance reporting on 1 account out of 3.  It's often recommended to have a balance reporting on less than half of your accounts.

BTW, DH and I both opened accounts within 6 months of apping for mortgage, ALONG with opening accounts the same month we app'd (and yes, they were showing on the CR's).  (We weren't planning on app'ing for a refi until a year later, but found the time was right.)  This was last fall, 9/09.  Absolutely no concern over the new accounts.  You're a rebuilder, as we are, and you can open accounts without the FICO score drop that those with long, thick CR's sometimes experience when they open a new account.

Now's a great time to open those accounts.  One would be good - two may be better.

Hope that's helpful.

[veracious]

Thanks, beamME up.

 Great ,informative, response.  I'm really appreciative of the help I'm receiving for my questions.

  It helps tremendously when , you can find kind, friendly people to help make sound decisions.

 I think ,from some of what I've learned in this short time,  it can only get better from here.

  Thanks.

[RobertEG]

I agree with the others who have posted.

FICO is a risk analysis of timely payment of debt.  Not having debt gives FICO no way to assess how you use it.

To this end, the two largest factors in FICO scoring are prior payment history (old derogs) and a showing of the holding, and prudent use of existing credit, primarily scored by your % util of revolving credit.  Revolving credit is scored very high in FICO scoring for two reasons.  It is usually unsecured, and it lets you establish your own level of revoling debt, up to its CL.  That tells the risk analysis a lot about your ability to prudently manage your credit.

I would open at least a token CC now.  The new inq needed to get this card will no longer be scored by FICO after one year.  During that year, you can demonstrate the prudent use of revolving credit.  It will lower your AAoA a bit, but lenght of credit history is a much smaller factor in FICO scoring, and is dependent, not only on AAoA, but also on your oldest account.

In my opinion, your need for revolving credit is an exception to the usualy sound adage of not applying for new credit within a year of mortage application.