Can adding a new CC lower my score?

[Anonymous]

Hey folks!

My question is in the subjet! Can it lower my score? I'm missing 3 items on my report at the moment. Walmart CLI, Chase Freedom, AMX BCE card accounts. However CK says my scores lowered by 5-6 points avg when my CSP reported this morning, I know its a fako but I thought it was funny! (Credit checks will also lower it I know that but I thoght the huge CLI over all would out weigh it? I could be wrong ) 

Thanks!

[rebuilding123]

Not sure exactly, but maybe the slight drop because AAoA? Also, the Balance wouldnt affect your UTI factor too much if you are already sitting at a decent UTI.

[Anonymous]

Yeah I'm at 1% before and after.

[Anonymous]

Yes.  There are a number of factors that the presence of a brand new account affects, any of which can lower your score:

Average Age of Accounts

Age of youngest account

Percentage of accounts that are "new" (< a year old, say)

Additionally if an inquiry also associated with the account is just reporting, that inquiry could also lower your score.

A sllightly more exotic reeason is that FICO regards certain kinds of accounts as just plain bad.  For example, what are called "Finance company" accounts.  Thus, if a new FC account appears, that will lower your score.

[rebuilding123]

Would credit one by chance be considered a finance company?

[Anonymous]

I don't know anytging about Credit One.  I just googled IS CREDIT ONE A FINANCE COMPANY and did not see any hits that shed immediate light.  But do continue to use google (I suggest "Why is a Finance Company bad for your credit score" and "What is a finance company").

Gotta run.  Good luck

[CreditDunce]

CreditOne is a national bank.  It isn't considered a consumer finance company by FICO.   However, it is always possible it is considered bad on some internal credit models.

Consumer finance are things like furniture store financing.  FICO considers it bad because most people would use the financing if they had other options.

Note: I believe it is 2 years for new accounts with FICO.  The INQ penalty goes away after 1 year.

[rebuilding123]

Thanks for the help guys! Sorry to hijack your thread OP!!

[Anonymous]

Hey CD!  Somebody posted a link (last fall) to an official FICO publication that clearly implied that their cutoff for what constituted a "new" account was 1 year.  I think it may have been Thom Thumb.  It was smuggled pretty far into the document but was unmistable nonetheless.   I had always leaned towards thinking that FICO implemented new =  < 2 years as well, so I remember being struck by that at the time.

Naturally I forgot to save the link.  :-)

But however FICO defines it internally (1 year or 2) adding a brand new account certainly constitutes a new account, and could cause a profile's percentage of new accounts to cross over some tipping point.  The New Credit category does seem to count the number of new accounts that you have as a factor.

[CreditDunce]

I also don't have any documentation about what FICO considers new accounts.  I am fairly sure codes 08 and 09 are 12 months, so maybe code 30 is also 12 months. 

The best evidence for 2 years I could find is this post:

http://paycheck-chronicles.military.com/2011/07/09/smart-not-perfect/

They claimed now new accounts for 15 months but code 30 is #1 on their mortgage app

One post isn't proof.   Unless someone else has code 30 without any new accounts in the past year, let's go with new account is less than 12 months.

Reference codes:

08   Too many recent inquiries in the last 12 months

09   Too many accounts recently opened  (I have also seen it "Too many accounts opened in the last 12 months")

30   Time since most recent account opening too short

EDIT: on cold medication.  Typo