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AoYA

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Regular Contributor

AoYA

Hi, if I opened an account to take advantage of promotional financing 5 months ago and paid it off and closed it 3 months ago is that account still considered my youngest account for scoring purposes?
Message 1 of 20
19 REPLIES 19
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Established Contributor

Re: AoYA

Yes. Closed accounts still appear on your reports and continue to age for 10 years.
Message 2 of 20
Regular Contributor

Re: AoYA

Thanks. One other question I should have included in the original post. For purposes of number of accounts reporting with a balance are closed accounts included in the denominator for this metric? If there is a balance on a closed account is it included in the numerator? I understand AZEO may be optimal, but if not then less than 1/3 is recommended?
Message 3 of 20
Super Contributor

Re: AoYA

As far as we know, any closed card with a balance is counted by FICO.  Specifically it is counted in the scoring factor  "Number of accounts with a balance" as well as total revolving utilization.  For total U it is considered as if it had a zero credit limit (but the balance is still added to your total revolving debt).

 

To the extent that FICO models might compare the "number of accounts with a balance" to a larger "denominator", it is virtually certain that this denominator would consist only of open accounts.  Thus if Bob has 20 closed accounts, they do not help his "denominator."

 

The following curious situation could arise, however.  Bob has exactly five open credit cards and ten closed credit cards -- no other accounts.  All of his closed cards show a positive balance. and exactly one of his open cards has a balance.  If FICO uses a ratio, it probably would show (11 accounts with a balance) / (5 open accounts) = 220% of his accounts reporting a balance.

 

The Lexis Nexis Credit based insurance score has extremely detailed reason codes with multiple penalty breakpoints above 101% in situations like this.  My guess is that if FICO looks at ratios of Accounts With a Balance against Total Accounts, it too would ignore closed accounts for the denominator and hence the ratio could go ever 100%.

 

A lot of people (though not all) are certain that some or all FICO models employ a ratio test (possibly in addition to the raw integer number of accounts with a balance) and there is further mixed opinion about whether open accounts like loans are ignored or not.  My feeling is that we'd need very well designed tests from many people before we could have rational degrees of confidence here.  There is a meme of "1/3 of revolving" but it's not clear to me whether that might be a claim that propogates on its own in our own echo chamber.

 

       (Side note: I have seen the negative reason code of Too Many Accounts

        Reporting a Balance when my ratio is extremely low.  That's one reason

        I think that the integer number of accounts matters in at least some

        FICO models.)

 

Do remember that the factors in the Amounts Owed category (CC utilization, installment utilization, Number of accounts with a balance, etc.) are always based on the instant your report is pulled.  There is therefore no long term advantage in trying to keep your CC utilization ultralow or the number of accounts reporting a balance extremely low.  Many of us don't worry about that at all except in the 40 days prior to an important credit pull (e.g. before applying for a mortgage, or for a hard to credit card, or whatever).

Message 4 of 20
Regular Contributor

Re: AoYA

Very helpful, as always. I appreciate the detailed and insightful nature of your responses and your commentary on this and other posts I’ve researched. Many thanks.
Message 5 of 20
Valued Contributor

Re: AoYA

@CGID I have had the reason code too many accounts with a balance even when I've had a very small number reporting. And my denominator is big enough, ratio is out the window. Always wondered why I still got that code when I had so few reporting. And I also appreciate your thoughtful and detailed explanations and lessons!





Installment loan reported this month,so technically, I'm at 2 months, but AoYA points were NOT reset. When new CCs hit and it is reset, I'll put the number it is.+1,+2,+2(Forgive typos, mobile.)(Everything said is Just IMHO.)
Scores updated AUG 4, '19. Since then, 5 HP dings to add; will update again.
Message 6 of 20
Super Contributor

Re: AoYA


@KatieKatie wrote:
Hi, if I opened an account to take advantage of promotional financing 5 months ago and paid it off and closed it 3 months ago is that account still considered my youngest account for scoring purposes?

Assuming you have not opened another account since that time, yes.

 

BM7, I get that negative reason statement when I have just 1 revolver report a balance and my mortgage (which has to report a non-zero balance, of course) which is 2 of 8 or 9 open accounts.  Basically, I feel this is a filler/fluff statement that is maybe impacting my score by a point or two, but nothing more.

Message 7 of 20
Regular Contributor

Re: AoYA

Thank, I was hoping it wasn’t counted since it was no longer active and at a 0 balance. My newest account prior to that one was a couple years prior. Oh well I checked and it was actually opened in July so I guess I can look forward to a few points when that ages.
Message 8 of 20
Super Contributor

Re: AoYA


@KatieKatie wrote:
My newest account prior to that one was a couple years prior. Oh well I checked and it was actually opened in July so I guess I can look forward to a few points when that ages.

If your AoYA was 12 months or greater (which it sounds like it was) prior to opening that account, you likely experienced a 15-20 point drop on your FICO scores from your AoYA going from 12+ months to 0 months.  When your current AoYA reaches 12 months again, which it sounds like may happen in July, your FICO scores should increase 15-20 points or so.

Message 9 of 20
Moderator Emeritus

Re: AoYA

Too many accounts with balances is not a fluff / filler statement, it’s just not a well tracked reason code. I have had that reason code both on and off my files previously under some mortgage models.

Really wasn’t until EX released their current CMS that we got reliable and granular access to one of the mortgage models with reason codes: beforehand you at best we’re getting once a month unless you spent the money for more frequent reports. A few of us have done that over time but not many so I am not very surprised around the lack of data.

I am comfortable for saying on FICO 8 you want less than 1/3 of revolvers reporting a balance... but we are learning so much new about EX 2 currently that it is hard to say. I am fairly confident that installment loans do count but we have seen say credit union cards get apparently excluded from revolving activity (all zero) do they get dropped from accounts with balances too?

I’m going to try to control for it soon as I have a clean file on EX and after my AAOA slips past 5 years next month and can generate that reason code fairly easily.

I am paying off one of my loans which hopefully should make it easier to track: test design wise I want to get to two installment loans and one absolutely counting national bank card reporting and see if I still have that reason code.

If it is gone I am going to find that damned line with other counting national bank cards, and I am going to spend a while testing different account types going above and below it: Amex, HELOC, credit union and a >=35k credit card.

Only variables should be AAOA at 5 years and 5.5 years as Birdman recently reported: AOYA and all inquiries are from December, only thing that may throw it is if I pick up a CIP for the new EIN but I’ll cross that bridge with a presumed additional EX inquiry if it comes. I’ll double check AOOA too.

My file is basically flatlined and getting daily pulls, I think that is a good test deck if not as epic as my old tax lien scorecard was where I had the same top score for 3 years on EQ FICO 5.

Open to feedback on test design, this one shouldn’t be hard or complicated to track as it can happen fairly quickly.



        
Message 10 of 20
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