Positive Trades versus average age of accounts

[Anonymous]

I’m contemplating a scenario by which I will intentionally do things that is generally considered negative in hopes that 1) the negative impact will be negligible yet 2) the positive impact will outweigh the negative thereby rendering a higher FICO based credit score within months of my action.

 

I’m operating under the notion that what is significant for some is insignificant for others.  For example, having a low average age of accounts will have more of an impact on my score if my overall risk is high, but if I have a relatively decent looking credit report, then though having a low average age is inferior to having a higher age of accounts, the impact will be less.

 

So, what am I thinking about?  Opening up a new account every time I want to purchase something on credit.  The purpose would be to amass overtime a massive amount of positive trade lines.  I’m thinking that a credit file with an enormous volume of positive trade lines (most all of them with no balance and very few with very low balances) will outweigh the ding that would result from an average age of accounts that I predict will be a smidgen over five years.  For example, if I open up an account every six months, then over a ten year period, I will have opened twenty accounts: one with an age of 10 years, one with an age of 9 years 6 months, one with an age of 9 years, etc.  If an account or two is kept open, the average age will be better than half to the degree that I keep open a couple beyond ten years.  Most accounts would be closed in about a year, as being closed doesn’t effect its average age.

 

For example, suppose I open a Wal-mart account to buy a TV.  I pay it off.  In about a year, I close the account.  Then, if I want to buy something else at Wal-mart, I can reapply and open up yet another account (new account number and all) and add yet another trade line to my credit report(s).

 

I will seek to keep my credit utilization below 10% at all times, and I will occasionally drop to 0%.

 At any rate, it’s just an idea.  What say you?  And remember, I’ll only be using credit when I need it.  I just won’t be using any accounts that I already have.

Message Edited by fast2 on 01-12-2010 10:22 AM

[Jazzzy]

Hi...and welcome to the forums.

One of the downsides, although likely not major, may eventually be number of accounts. I have 35 accounts, mostly attributable to grad school loans that keep transferring between lenders. Most of my accounts are not even open accounts. When I pulled my last EQ report through Score Watch, I had the dreaded red flag beside number of accounts. The red flags point out an aspect of your credit report that is hurting your FICO score. I have no idea what the score impact might be of my number of accounts.

I don't think adding an account every 6 mos. will be too big a negative. Those old accounts are like gold when calculating average age of accounts.

[daisyduke]

HI Fast2, I agree with your thinking of infiltrating new accounts to off set the bad, but would recommend chosing your creditors carefully.....read, read and read some more about what creditors are doing and stay away from fee harvesting cards...although it seems as though you want to have some short term relationships and plan on paying them off in full, in which case, interest and rate jacking will not be your concern, because you're not in it for the long term. You will have to do some research to find out if you qualify for the cards before you apply - don't waste an inquiry... If you want a card that will be good to you in the longer term, then look at the good banks that are not rate jacking or fee harvester cards, but cards that will grow with you and five years down the road you know you won't be sitting with a pitiful CL.... You also need to take in consideration that certain lenders and credit unions are sensitive to excessive inquiries....so I wouldn't app for ten cards then try to get a Visa issued by Pen Fed (ultra conservative standards)....So, let's say you could get a 10K Visa card, maybe Mr Bank won't issue a 10K Visa card because you've got XXX amount of available credit already so therefore you are denied. Depends what your ulitmate goal would be - if it is to purchase a home soon, i would not recoomend having too much available credit, even if the balance is sitting at zero. Generally, it's a good idea to keep accounts open but if you have 50K in CC's available to you, mr Banker might not want to give you anymore. Case in point: At one point in my life, I had around 60 or 50K available credit. Thanks to my exhusband who paid all of our bills on time and in full, right before I got divorced I applied away and i got all of it....ok, then I went to my local bank branch and asked for a 5K loan, they denied me. I was in shock. They said I already issued you a CC with a 10K limit, use the card. I didn't want to put my surgery (elective) on a card, but rather a loan. Then the loan officer told me I had too much credit available.....so that's how that can work... Good luck to you!!

[AndySoCal]

I would say your idea would not work and would ultimatly lower your score. The FICO score as some finance writers say likes a long credit histroy.  They are not referring to how long you have had credit. I would use the credit you have and think twice before applying for more.

[Anonymous]

AndySoCal says, "I would use the credit you have and think twice before applying for more."  I think that is generally wise advice, but the problem is he is assuming I'll have credit available.  I cannot use cards that have been closed.

Also, let me clear up that I don't have bad credit.  I have good credit.  My objective would be to raise my FICO score over time while intentionally sabotaging my average age of accounts and almost always having a new account less than a year old.  It's a harebrained scheme, I know, but it's something I've been tossing around.  My thinking is that yes, it will hurt my credit score, but I hoping it'll be insignificant and be dwarfed by the positive effects that a substantial number of positive trade lines will bring.  I'm making a distinction between having positive trade lines and positive trade lines that are open.  Yes, having a substantial number of open accounts will raise my available credit rendering me more risky, the more I have, but I have no intentions of keeping them all open for long periods of time.

[daisyduke]

Hi Fast2,

I have three bad accounts - so after I got my car loan, I decided to add more positive, open TL's - so now i have 17 good accounts and three bad on EX...not much I can do except GW the baddies, but my theory was infiltration, a little bit at least. Now I am letting everything age and using the cards, but try to PIF each month...

You also have to take into consideration, I read this last night....that FICO doesn't look at dormant accounts if they are 6 months or older. Meaning, If you have not used your card in six months and the balance is zero, well, that account isn't being factored into the scoring system.....

Sorry I misunderstood you about the infiltration theory - I thought when you posted this you had a few baddies and your short term goal was to infiltrate the good with the bad, offset it.  This is not the case...If I had stellar credit, I would not worry too much about my FICO score and just get what I needed. this is not the case for me.

Just some food for thought.

[Jazzzy]

I will speak to the advantages of having substantial numbers of positive tradelines.

I had an EQ FICO of 766 on August 25th (that's about when I started tracking). I now have an EQ FICO of 753. The loss of those 13 points, I believe, is because I have 7 new accounts opened since May of '09...so they are all less than one year old. The new accounts are 3 for school loans (2 already closed & transferred into 1), 3 credit cards (AmEx, PenFed & Discover), and one auto loan.

My oldest account is 26 years old, and EQ has 35 positive accounts for me (about half of them closed). It has certainly lowered my AAoA, but I am still ~ 6 yrs.

I am looking forward, however, to letting these age. I don't like having this many new accounts. I realize, however, that you are planning only one new tradeline ~ 6 mos. I don't see any harm in this if you handle it responsibly. A long, thick, positive history is a nice thing to have, but it isn't obtainable unless you add new tradelines occassionally. The only thing I would do perhaps differently than you originally suggested is that I would save that once-every-6-mos application and apply for good, sound cards. There is a place for store cards if you get a deal by having them, but make sure you have some good, national bank cards on your list. And...I don't think you need to worry about closing them down. Why would you, if they don't have an annual fee?

To add new cards, you have to know yourself well enough to know that you won't abuse the credit.