Do new accounts themselves actually drop scores?

[Anonymous]

Here's a link to my thread on how much app sprees drop scores and how long it takes to rebound:

http://ficoforums.myfico.com/t5/Credit-Cards/How-much-did-your-quot-spree-quot-drop-your-scores/td-p...

[righthererightnow]

It's the age change.. and the inquiry change.. that affect the score. If those don't change, then it won't change. Well... wait... you're adding in utilization too, so it should send your score UP in that case, a positive change to the score due to more room for utilization.

[Thomas_Thumb]

Too many accounts opened in a short period can hurt score according to Fico. This is in addition to a negative impact that could relate to inquiries.

[Anonymous]

I guess what constitutes "too many" is the question here.  As it says, length of credit history is clearly a factor... so "too many" for someone with a longer credit history (thicker file) I would guess could be more than a few accounts where just a few could impact someone with a thin file pretty harshly.

[JLK93]

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@Thomas_Thumb wrote:

Too many accounts opened in a short period can hurt score according to Fico. This is in addition to a negative impact that could relate to inquiries.

Too many new accounts will accumulate inquiries, reduce AAoA and cross certain scoring thresholds. No where does it say that new accounts themselves affect the credit score. 

Like I've said before, I have years of data points showing no evidence of new accounts affecting FICO scores. That could be related to having a thick account, but I'm not yet convinced. There might be a 1 year threshold for new accounts on FICO 8. I'll find out next month. The Myfico simulator seems to strongly suggest such a threshold for my profile. Until I see it, I remain somewhat sceptical. 

Too many inquiries and crossing thresholds can have a significant effect. Inquiries, by themselves, can cause up to  a 30 point loss on Experian 08. For certain profiles, a new account on EQ 04, with no accounts in the previous 6 months, can cost up to 28 points. One person lost 75 points on FICO 9, for one inquiry, due to being knocked into the FICO 9 high risk score card.

What FICO says is not exactly authoritative. FICO tells us only what they want to tell us. The don't tell us most of what we want to know. FICO is not about to give away any secrets. I have no reason to believe that reason codes were intended to give us an inside view of FICO scoring algorithms. 

According  Myfico monitoring service, My credit history is Exceptional. Under Positive Factors it says that I "have an estblished credit history." Yet, the Negative Factors for some scoring models, such as TU 04, say I have a short credit history.

Experian FICO 98 gives a Negative Factor saying that I "have made heavy use of available revolving credit". 1 account reporting a balance of $95. One of my Positive Factors is "You've limited the use of your available revolving credit." No logic whatsoever.

FICO says that I have an Exceptional Mix of Credit. I don't think most reasonable people would agree. And, I have no reason to believe that my reports are scored according to this factor. The fact that Thomas_Thumb scores significantly higher for certain enhanced scores seems to show the ridiculousness of this Factor.

[Thomas_Thumb]

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@oilcan12 wrote:

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@Thomas_Thumb wrote:

Too many accounts opened in a short period can hurt score according to Fico. This is in addition to a negative impact that could relate to inquiries.

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Too many new accounts will accumulate inquiries, reduce AAoA and cross certain scoring thresholds. No where does it say that new accounts themselves affect the credit score. 

Like I've said before, I have years of data points showing no evidence of new accounts affecting FICO scores. That could be related to having a thick account, but I'm not yet convinced. There might be a 1 year threshold for new accounts on FICO 8. I'll find out next month. The Myfico simulator seems to strongly suggest such a threshold for my profile. Until I see it, I remain somewhat sceptical. 

Too many inquiries and crossing thresholds can have a significant effect. Inquiries, by themselves, can cause up to  a 30 point loss on Experian 08. For certain profiles, a new account on EQ 04, with no accounts in the previous 6 months, can cost up to 28 points. One person lost 75 points on FICO 9, for one inquiry, due to being knocked into the FICO 9 high risk score card.

What FICO says is not exactly authoritative. FICO tells us only what they want to tell us. The don't tell us most of what we want to know. FICO is not about to give away any secrets. I have no reason to believe that reason codes were intended to give us an inside view of FICO scoring algorithms. 

According  Myfico monitoring service, My credit history is Exceptional. Under Positive Factors it says that I "have an estblished credit history." Yet, the Negative Factors for some scoring models, such as TU 04, say I have a short credit history.

Experian FICO 98 gives a Negative Factor saying that I "have made heavy use of available revolving credit". 1 account reporting a balance of $95. One of my Positive Factors is "You've limited the use of your available revolving credit." No logic whatsoever.

FICO says that I have an Exceptional Mix of Credit. I don't think most reasonable people would agree. And, I have no reason to believe that my reports are scored according to this factor. The fact that Thomas_Thumb scores significantly higher for certain enhanced scores seems to show the ridiculousness of this Factor.

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The intent of reason codes and associated reason statements is to provide consumers and loan officers with insight into what is affecting their credit score and credit decisioning implications. Really that is the main purpose. Certainly they were not developed/published to provide disinformation.

The flaw lies with the automated system that spits out reason statements which are then listed on reports. In some cases they are clearly bogus but, many are quite insigthful.

For example, a couple reason statements I saw for the 1st time when I maxed out a NPSL card at 100% but had 0% Ag UT were::

1) You've made heavy use of your available revolving credit

2) There are no recent balances on your revolving credit accounts

There is no question these statements are representative of my file condition at the time and thus insightful. 

However, another reason statement on the same report (different CRA) states:

1) You opened a new credit account relatively recently. 

This is not insightful as the newest account I opened was 5 years ago . The reason codes/statements have meaning - the automated system just gets it wrong sometimes. So what.

As Revelate has said many times, the category ratings listed on FICO reports are 3rd party presentations meant to provide an indication of how one is doing. The rating does not equate to how well one actually scores in a given category. I do believe charge cards, installment loans and revolving credit cards are all classified differently. FICO wants to see a mix of open accounts in scoring but a large QTY is not necessary. However, the 3rd party presentation rating puts undue emphasis on account QTY.

Testing/observing how individual profiles respond to changes can be used to support/refute a hypothesis conditionally. However, it generally can't  be extrapolated to disprove something outside valid boundry conditions. Pasted below is an excerpt from another document (Credco) speaking to recent account openings. Again, the code 09 is independent of inquiries - code 08. This one speaks to Fico 04 and Fico 98 scores.

There is nothing wrong with a spree and it is often a good strategy. This does not negate the potential ramifications to score identified in reason codes.

[JLK93]

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@Thomas_Thumb wrote:

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The intent of reason codes and associated reason statements is to provide consumers and loan officers with insight into what is affecting their credit score and credit decisioning implications. Really that is the main purpose. Certainly they were not developed/published to provide disinformation.

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I doubt that reason codes were ever developed to provide insight to consumers. Lenders are required to provide reasons for adverse action. I suspect that the primary purpose of reason codes was to assist lenders with compliance.

I have no reason to believe that the people who wrote the reason codes had intricate knowledge of the algorithms.

[Thomas_Thumb]

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@oilcan12 wrote:

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@Thomas_Thumb wrote:

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The intent of reason codes and associated reason statements is to provide consumers and loan officers with insight into what is affecting their credit score and credit decisioning implications. Really that is the main purpose. Certainly they were not developed/published to provide disinformation.

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I doubt that reason codes were ever developed to provide insight to consumers. Lenders are required to provide reasons for adverse action. I suspect that the primary purpose of reason codes was to assist lenders with compliance.

I have no reason to believe that the people who wrote the reason codes had intricate knowledge of the algorithms.

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True, back when these were written there was no customer focus - it was mostly lender compliance focused. Fortunately times have changed in recent years and the Score Factor Codes have become available to consumers. The degree to which score is affected is not provided but the Factor is looked at by the algorithm by definition if it's on the list.

[Anonymous]

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@oilcan12 wrote:

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Too many new accounts will accumulate inquiries, reduce AAoA and cross certain scoring thresholds. No where does it say that new accounts themselves affect the credit score. 

Like I've said before, I have years of data points showing no evidence of new accounts affecting FICO scores. That could be related to having a thick account, but I'm not yet convinced. There might be a 1 year threshold for new accounts on FICO 8. I'll find out next month. The Myfico simulator seems to strongly suggest such a threshold for my profile. Until I see it, I remain somewhat sceptical. 

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So your theory then is that my score dropped 22 points based on 1 inquiry as my AAoA remained unchanged (from the lens of FICO) from the addition of 3 new accounts.  I'd find it hard to believe that my score would drop 22 points off of 1 inquiry when I have a moderately thick file and hadn't opened any new accounts in the last year and very few in the last 3 years; to me, it would seem that the new accounts themselves impacted the score at least to some degree and ask others pasted earlier into the thread new accounts can impact score up to around 10%.

I guess the only way to test this data point (which is impossible) would be if I was denied for the new accounts, so the inquiry would go up by 1 but there would be no new accounts.  If I were able to do that it would eliminate new accounts as a variable and isolate it to the inquiry.  In both examples my AAoA remains unchanged.

[JLK93]

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@Anonymous wrote:

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So your theory then is that my score dropped 22 points based on 1 inquiry as my AAoA remained unchanged (from the lens of FICO) from the addition of 3 new accounts.  I'd find it hard to believe that my score would drop 22 points off of 1 inquiry when I have a moderately thick file and hadn't opened any new accounts in the last year and very few in the last 3 years; to me, it would seem that the new accounts themselves impacted the score at least to some degree and ask others pasted earlier into the thread new accounts can impact score up to around 10%.

I guess the only way to test this data point (which is impossible) would be if I was denied for the new accounts, so the inquiry would go up by 1 but there would be no new accounts.  If I were able to do that it would eliminate new accounts as a variable and isolate it to the inquiry.  In both examples my AAoA remains unchanged.

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That is not the only way to test it.

I wasn't expressing a theory. I was relating extensive personal experience, testing and observation.

I have 3B monitoring. I was grandfathered in to the original price of CCT, so I have maintained that as well. I am able to pull an Experian report and score every day. I have been able to update TU 08 scores, on a daily basis, for years, by methods that won't be discussed here. I also receive FICO scores from DCU, Amex, Barclays, Discover, Citi, BofA, NASA FCU and Walmart. I am constantly aware of changes to my FICO scores on a daily basis.

I opened approximately 30 accounts in 19 months. At one time I opened 11 accounts in a little over a month. Another time, I opened 5 cards in a little over a month. 

I monitor may scores closely and have never seen a score drop due to a new account reporting. 

If, your 22 point loss was caused by a new account reporting, that would mean that we are being scored very differently by FICO. While possible, that would seem to be a less likely explanation.

A more likely explanation would seem to be that you crossed some sort of threshold or that something else happened. You seem to have a lot going on with your reports. It is unlikely that the inquiry counted more than 7 points.

Unless I missed it, you still haven't answered the question about how much your AAoA changed.

Of course, you did say that you have dirty reports. It is certainly possible that FICO punishes certain dirty profiles for new accounts. But, that is not the same as saying that new accounts drop FICO scores in and of themselves.