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ficus wrote:
Let's say one has 2 CCs.
10 year-old and 5 year-old.
The average age is 7.5 years.
Can some one explain a more complicated example, thus revealing exactly how the formula works? How about 1 10-yr CC, 2 3-yr CCs, 4 1-yr CCs, and 1 6-yr CC. If you have a simpler example on which to demonstrate the calculation, please provide one.
You are asking some very good questions one of which I'm not 100% on. I'm not sure about the credit length v. average-age of accounts question, I'll have to look into it.
ficus wrote:
Thanks for the example. This is confirmed knowledge, right? That when they refer to "average", there is no complicated algorithm behind it. That it's just simple average.
My next question then is while the age of the oldest account is probably considered nicely when calculating the score, how much of a 'distraction' does the average age of CCs is on the score? The reason why I ask is because the FICO formula seems to rely on seeming contradicting factors like too few of TLs vs. too many, the oldest CC vs. average age, been looking for new credit vs. looking for too much credit lately (hard inqs, too many new TLs of late, etc), and I suspect a few others. What factors are given more preference when dealing with such opposing issues?
ficus wrote:
If all types of accounts are taken into consideration, I understand that the average age of the credit history would fluctuate when, say, a fulfilled auto loan or closed CC eventually dropped off the report. But realizing that it's almost always a bad idea to close your oldest CC, once someone has decided they have enough CCs, because after all, they somehow frown upon one having too many CCs, and also because you know you don't really need any more cards, isn't it counterproductive to continue to obtain more cards, thereby reaging the history? But then again, the formula wants to see you applying for new credit too, so that's why I ask how much of an impact does reaging have compared to the 'looking for new credit' factor? In other words, is there a well-balanced approach to all this?
Message Edited by ficus on 10-05-2007 02:42 PM
Unless I'm reading something wrong, this is an example of FICO doesn't regard income, but your lender certainly does. The lender said that they have a policy of not extending the CL over 50% of the income specified on the application. Yes, they looked at your FICO score, but they also looked at your application with its additional info (as any sensible lender would do), and decided that your debt-to-income would be a little too high for their comfort. FICO scores are only one part of the picture that the lender looks at.
@ficus wrote:
I remember seeing a post where people talked about how salary didn't matter in general. Well, my recent experience certainly proved otherwise. At least it's not the case with my circumstances. When I tried to apply for a card, I was originally denied. The letter listed the lien as the reason. But when I called to ask for reconsideration and explained that the lien had already been paid off, and that I could provide proof, they said that they could approve me and that no documentation would even be required, and that the reason why I got denied was because they couldn't contact me to ask questions. Anyway, when it came to discussing the CL issue, they said that they have a policy of not extending the CL of over 50% of the income specified on the application.
Average-age of accounts does not contradict credit length. In FICO scoring, average-age of accounts is simply one element of credit length.
ficus wrote:
Thanks for the example. This is confirmed knowledge, right? That when they refer to "average", there is no complicated algorithm behind it. That it's just simple average.
My next question then is while the age of the oldest account is probably considered nicely when calculating the score, how much of a 'distraction' does the average age of CCs is on the score? The reason why I ask is because the FICO formula seems to rely on seeming contradicting factors like too few of TLs vs. too many, the oldest CC vs. average age, been looking for new credit vs. looking for too much credit lately (hard inqs, too many new TLs of late, etc), and I suspect a few others. What factors are given more preference when dealing with such opposing issues?
@fused wrote:
Rather accounts are open or closed, they are factored exactly same way when it comes down to average-age and credit length.