New Credit Card - Score Impact

[JBjunior]

Just for fun as I wait for it to report.  I got a second Amex back at the beginning of January, it was a SP, so no new inquiry.  The card will only slightly, like .3, drop my AAoA.  My scores range from 815 to 842, how much will the new account impact my score?   I think a new account drops the score based on the inquiry & drop in AAoA, but is there something else tied to "seeking new credit" or a different factor based on newest account?

[NRB525]

Congratulations on getting the second AMEX, but..... there's a HP on EX somewhere. You may not have seen an alert for it, but there's a HP with a new AMEX card.

At your score level, with no other recent apps, you might see a 7 - 10 points score drop, either it has already happened on EX (where AMEX always seems to HP) or it will appear on TU and EQ, presuming there is an effect.

If the new card reports a significant balance ( associated with bonus spend for example ) then it is more likely to see the score drop. If no significant balance, it's possible not much score change at all.

Although at over 800, since your score was approaching "No Risk" levels, you have introduced a "New Risk" for FICO to contemplate, so it is possible the score impact is a bit more than 10 points.

Update us here about what the result is. Always interesting to see how files react.

[Anonymous]

Hi JBJ.  You are right that opening a new account typically involves an inquiry and always involves a drop in AAoA.  Neither will cause you to take a score hit for sure.

In the case of inquiries, this is because inquiries appear to be grouped in a "step function."  Here is a made up example to illustrate how a particular scorecard for a particular model might handle inquiries:

0-1 Inquries: No penalty

2-3: Minus 5 points

4-5: Minus 5 more points

6-8: Minus 5 more points

9-12: Minus 5 more points

13+: Minus 5 more points

In the fabricated example above, if you had 4 inquiries already and received one more, you would take no score hit.

For AAoA, a AAoA drop that doesn't cause you to go to a lower integer value appears not to cause a score drop.  For example, if adding a new account caused your AAoA to go from 3.7 years to 3.1 years, then it wouldn't result in a score drop.  And when your AAoA gets really high, it can drop 1 or more integer values with probably no score impact: e.g. going from 18.5 to 16.1.

In addition to those two factors, it appears that FICO counts how many "new" accounts you have, including the percentage of accounts that are new.  To see how this might work out, suppose you have Bob who has seven credit cards that are all 2+ years old.  Then he adds two more cards.  That means 2/9 of his cards are new.  That's less than 25%, so perhaps there would be no FICO penalty.  But if George has only one card (3 years old say), and he also adds two more cards, then 2/3 of his cards are new, and so he might very well get a penalty.

Another similar factor is age of youngest account.

These two factors are mentioned, along with inquriies, in the New Credit section of Learn About Scores here:

http://www.myfico.com/CreditEducation/New-Credit.aspx

AAoA is mentioned in Length of Credit History.

http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

[JBjunior]

Absolutely no hard inquiry.  I have pulled multiple reports from a few days after to a month+ after the new card and there is no inquiry.  I don't really get alerts from anywhere, just pulled new reports.

To add on:  I applied early January and received the card and activated mid-January.  I have a report from Experian from 28 January with only one inquiry from almost 2 years ago (falls off in June).  I started Credit Check Total 3 days ago so I got another round of reports and still only has the same inquiry.  If there was an inquiry... it is hiding.

The new credit card isn't a product change but was a card they wanted to give me to keep me a customer for the Costco True Rewards, I was preapproved and they gave me the exact same balance as the other card.  Maybe it was a special occasion.

[NRB525]

Oh, so it's Costco related. That changes the possibilities.

Could be a "stealth PC" in that case. Your True Rewards card will be closed. This card replaces it. PC.

[JBjunior]

Well, I chatted with a rep a couple of days ago and I told them that I "thought" it was a PC, she assured me it wasn't it was just an offer they sent me, and she kept telling me that I will get a PC offer or it will close before the end of March.  I wanted to make sure that my information wasn't transferred because I didn't want a new Visa card.  Regardless, no HP.

Anyway, back to my original question.

[Anonymous]

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@JBjunior wrote:

Well, I chatted with a rep a couple of days ago and I told them that I "thought" it was a PC, she assured me it wasn't it was just an offer they sent me, and she kept telling me that I will get a PC offer or it will close before the end of March.  I wanted to make sure that my information wasn't transferred because I didn't want a new Visa card.  Regardless, no HP.

Anyway, back to my original question.

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Did you see my answer to your question?  The answer is that, according to FICO, they do have additional scoring factors for the impact of a new credit card -- besides the factors of number of inqiuiries and AAoA.  I give you a couple of these.

That was one question you had: i.e. are there other scoring factors that a new CC could affect (and possibly cause a score drop)?

The other question was: what will my score drop be?  ("how much will the new account impact my score?")

The answer there is easy.  We don't know.  The precise working of the algorithms are hidden; we don't have access to them.  And if we did, we'd need your entire profile.

I do give you one piece of info that might steer you toward some guess, which is to look and see if the new account causes your AAoA to cross an integer line.  E.g. if your AAoA goes from 4.1 to 3.8.

Of course, as you know, there's no practical issue involved here.  All you need to do is give it a month and then look.  The empirical method works amazingly well.

[JBjunior]

Yep, I saw it, thank you very much for your response.  I know there isn't an exact answer, that is why this is just for fun.  My hand calculations do not have it dropping that way, it will drop within the same integer, say for example 4.8 to 4.3.

[Anonymous]

Hey JBJ.  This could be a really interesting case study then!

Here's why.  If you are not crossing an integer value for AAoA, and you do not receive an extra inquiry anywhere, then in theory those two factors should not cause any score drop.  If you can keep all your other scoring factors steady (especially CC balances), then this might be revealing for the possible effect of the other "new account" factors -- at least for a profile like yours.

What tool would you be using to pull your FICO 8 each month?  (Sorry, I see you are using Credit Check Total.  Perfect for this purpose.  You want to pull true scores at the time you want and not rely on "alerts.")

Is there any way you can keep your CC balances steady between the last score pull (before the appearance of the new card on your reports) and after it appears and you pull your scores again?  You'd need the same number of CCs showing a positive balance, the same overall CC utilization, the same number of cards showing a high individual utilization.

[JBjunior]

Hmmm, it should be similar.  I will have to look closer.