FICO simulator suggest increase score when apply new credit?

[Anonymous]

Hi all,

First post.

I checked myFico score simulator. If i apply a new credit card with 5k limit, my equifiax would increase 20 points and experian would increase 5 points.

I know HP would always result in credit decrease.

Is simulator not accurate?

Thanks 

[Anonymous]

No not accurate, most if not all simulators are not accurate, including myFICO simulator, because credit profiles are too complicated, too many factors for simulators. The only way for a new credit card account to raise your score by 20 points is if it's your first credit card, or if that 5k limit drops your aggregate utilization across multiple scoring thresholds overcoming scoring hits that usually come with adding new accounts (Inq, drop in AAoA, reset of AoYA).

[Anonymous]

Hard to know what the simulator is actually saying to you, since I can't see its exact wording (nor do I know what you credit report looks like).  My guess is that the simulator is not claiming that the bare fact of applying for a card would improve your score.  Rather it is saying that being approved for a new card will improve your score (and only after the card appears on your report).

There are many reasons why adding a card might cause a person's score to go up.  It's also quite possible that it might cause a person's score to go down.  It all depends on exactly what the person's report looks like.  As I say, none of us know what your report looks like so we can't say.

[Anonymous]

Thanks for the reply. This is first time I heard the score can go up by getting a HP. Thanks.

[Anonymous]

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@Anonymous wrote:
Thanks for the reply. This is first time I heard the score can go up by getting a HP. Thanks.

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You misunderstood. HP alone will never raise your score, the addition of the new account (if approved) once it reports to CRAs (after you have already taken the HP hit) MIGHT raise your score in rare occasions depending on one's profile.

[trusty]

After a year, a new account should definitely improve the score.

But, each inquiry costs approx. between 4 to 6 points. Somewhere into the double digits of inquiries, I believe the points hit - from further inquires - is diminished. I believe the inquiry point hit goes away after one year, as well.

Scoring simulators are largely useless. Your score can only go up with additional length of history, no lates, no large balances, and no derogatory items. The score can only go down by shortening the length of history, maxing out cards, or not paying payments; and, of course, applying for new accounts. Nobody needs a simulator to know the good effects from the bad.

Other than that, the score is kind of like a percentile, as it were... but, for likelihood of default.

[Anonymous]

Thanks for the info

[Anonymous]

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@trusty wrote:

After a year, a new account should definitely improve the score.

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Hi Trusty.  It's not true in all cases that a new account will raise one's score after one year.

New installment accounts rarely raise one's score, for example, unless the person had no open installment accounts at all.

New revolving accounts (like a credit card) sometimes raise a person's score, either promptly or as you say a year later.  But they often don't.  Suppose a person had five open cards and a loan, for example.  Adding a sixth card would not raise his score, even a year later.  In fact, the person's AAoA would be slightly lower than it would have been had he not opened the sixth card, so his score might be lower

Of course, if a person had a utilization of 31%, and then added a sixth card, which brought his utilization down to 27%, then he'd very likely get a boost, but that wouldn't take a year to realize.

Bottom line for our OP is that adding a new card has a medium to long term advantage (scoring and otherwise) if he has a small number of cards.  We can make much better guesses if he tells us how many open cards he has and the age of his youngest account.  We'd also need to know the balances and credit limits for all his cards.

[Anonymous]

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@Anonymous wrote:

New installment accounts rarely raise one's score, for example, unless the person had no open installment accounts at all.

I can confirm this: no open accounts to 1 new installment loan had no effect on my score. Maybe it's a positive with a new account, followed by a negative with a newly opened high balance? 

New revolving accounts (like a credit card) sometimes raise a person's score, either promptly or as you say a year later.  But they often don't.

I can confirm this as well. The first new revolving account that was added to my report at 2% utilization caused a +51 point gain (No derogs scorecard, AoOA 1 yr 1mo - not relevant to OP, but for others it might be).

The second new card was added to my report a day later, and my EX FICO 699 did not change. What did change was this:

• 'Amount of New Credit' changed from Good to Fair, moving from 1 card to 2 cards
• 'Credit Mix' changed from Good to Very Good, moving from 1 card to 2 cards
• AAoA changed to 5 mos (AoOA 1 yr 1 mo,  1 closed secured loan)

 There's a lot more data, including all the additional FICO scores (Score 2, Bankcard 8, etc.), under my 'All at Just Under 8% Utilization Experiment' post in this forum.

[Revelate]

Cassie: if you had no open accounts within the last six months prior to that installment loan how were you generating a FICO score at all?