Interview with Fair Isaac scoring expert

[Barry]

FICO scoring expert and Fair Isaac spokesman, Craig Watts, offers FICO scoring tips and clears up some common misconceptions:

http://www.bankrate.com/brm/news/Financial_Literacy/June07_credit_score_FICO_a1.asp?stage=1&caret=38...

[Tuscani]

Thanks for sharing Barry!

What I find interesting is this quote:

"But, closing credit cards is never going to help your FICO score. And in some cases, can in fact hurt your FICO score. If you want to close credit cards for other reasons, that's perfectly acceptable and you should do whatever you need to do in order to manage your credit well, but just don't expect the closing of credit card accounts to improve your credit score."

Yet, according to myfico.com, one of the common factors attributed to a low score is too many open accounts. I personally have always believed this to be a fallacy, but it is an area of confusion for many consumers.

Message Edited by Tuscani on 06-23-2007 09:31 PM

[Anonymous]

Shure it is confusing when in same report they give you advice to close some CC accounts because you have too many and then to consider opening more CC, since you have just a fiew.

[Anonymous]

Thank you.

[Barry]

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Tuscani wrote:

Thanks for sharing Barry!

What I find interesting is this quote:

"But, closing credit cards is never going to help your FICO score. And in some cases, can in fact hurt your FICO score. If you want to close credit cards for other reasons, that's perfectly acceptable and you should do whatever you need to do in order to manage your credit well, but just don't expect the closing of credit card accounts to improve your credit score."

Yet, according to myfico.com, one of the common factors attributed to a low score is too many open accounts. I personally have always believed this to be a fallacy, but it is an area of confusion for many consumers.

Message Edited by Tuscani on 06-23-2007 09:31 PM

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Tuscani,

Does the factor you're referring to actually say "too many open accounts"?   If so, could you let me know exactly where it says that?

Thanks,

Barry

[Anonymous]

From: http://www.myfico.com/CreditEducation/ImproveYourScore.aspx

# Don't close unused credit cards as a short-term strategy to raise your score.
# Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower score.

These two seem contradictory at first, but I think the idea is that you don't want your average account age to be affected by opening new accounts (whereas older unused accounts can't hurt).

[Tuscani]

The wording has changed with the new report format. It was "Too many open accounts". Now it says "Accounts open in past year".

[Tuscani]

Another example:

http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&thread.id=5481

Sillygirl Contributor Posts: 26 Registered: 05-30-2007 IP: 207.67.99.209 Message 3 of 4 Viewed 37 times		But when I pull my reports through FICO I get statements like "Too many accounts" showing up. If I only have 5 revolving, student loan, and installment accounts -- but 15+ student loan accounts that are closed but still show on my report. So why the flag on my report next to number of accounts if they aren't looking at the high number as derogatory?
06-25-2007 12:33 PM		Rate this message:  1 2 3 4 5 (Best)

[Barry]

This has always been a common misunderstanding, not just among consumers but also among lenders, mortgage brokers, etc. -- equating number of accounts on file with the number of "open" accounts on file.  To be clear, while the FICO scoring formula considers the number of accounts on file and the mix of different types of accounts, it does not specifically look at the number of open vs. closed accounts.

In fact, FICO scores and the myFICO site have never actually had any negative factors or explanations that refer to "open" accounts as having a negative effect, but people seem have taken "number of accounts" to automatically mean "number of open accounts" -- a misconception we're constantly having to clarify.

[MidnightVoice]

oops

Message Edited by MidnightVoice on 06-26-2007 04:12 PM