Which is more important?

[Anonymous]

Curious about opinions on the following scenario: My credit has gotten (finally) to the point of being okay and I have been able to start getting some decent/prime cards. My wife's still needs some work. I can put her on as an AU on my newer cards, but that will kill her AAoA. Her AAoA is something like 7 yrs. but she currently only has 1 $400 card.

I understand no one knows for sure, but in your opinion, what is more important for her score -- keeping that AAoA or having some cards with decent limits/low util? My thoughts are it will be better to put her on as an AU, but I wanted to check-in here and see what you all might think.

[llecs]

Eliminate higher CLs out of your mind. FICO ignores your CL...it's how you use that CL that counts. Balances on existing CLs are important.

When adding a new CC or adding someone as an AU, consider the length of history, AAoA, utilization on the card being added, payment history, and mix of credit.

Length of history and AAoA factor in. I don't know what makes up your DW's AAoA. I don't know if it's a 7 yr CC only or if there are a series of opened and closed accounts outside of the opened CC that add to the equation. Worst-case, if the CC is the only account on her CR, then adding a new CC today will drop the AAoA to 3 years. A 7-yr to 3-yr drop can be harmful. On the flip side, in 3.5 years, it'll be back where it was assuming nothing is added or dropped.

Utilization is key. You would only want to add an AU for a CC with low util.

It goes without saying, but adding an AU account should only be done on clean CCs.

Finally, mix of credit is very important. Your DW is lacking a good mix if all she has is one CC. If she adds a second, even if new, she'll see an increase in FICO, provided that CC has a clean history and low (<10%) utilization. I think the gain due to an improved mix trumps the loss in AAoA.

[vanillabean]

While FICO calculates directly based on the credit limit (util as balance in part of credit limit), FICO does not directly score on it, unlike util and balance.

Let's say you have one card. If your balance is $600 and your credit limit is $3000, that's worse than if your balance is $400 and your credit limit is $2000. The util is the same, but the balance average is higher than a balance threshold of $499.

Credit limits are overrated. It's much easier lowering your util by lowering your balance, and a bonus is your AAoA won't suffer. Of course on the other hand, the sooner she gets some more cards of her own, the sooner they will age.

At some right time, you can make her AU on your best card and look for a card she can apply for. It has to be positioned either carefully or slowly.

[MarineVietVet]

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@Anonymous-own-fico wrote:

While FICO calculates directly based on the credit limit (util as balance in part of credit limit), FICO does not directly score on it, unlike util and balance.

Let's say you have one card. If your balance is $600 and your credit limit is $3000, that's worse than if your balance is $400 and your credit limit is $2000. The util is the same, but the balance average is higher than a balance threshold of $499.

Credit limits are overrated. It's much easier lowering your util by lowering your balance, and a bonus is your AAoA won't suffer. Of course on the other hand, the sooner she gets some more cards of her own, the sooner they will age.

At some right time, you can make her AU on your best card and look for a card she can apply for. It has to be positioned either carefully or slowly.

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Could you explain this further? I'm not sure what balance average and balance threshold mean and how that affects scoring.

[vanillabean]

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@MarineVietVet wrote:

Could you explain this further? I'm not sure what balance average and balance threshold mean and how that affects scoring.

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I can do better by directing you to jello's post.

[MarineVietVet]

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@Anonymous-own-fico wrote:

I can do better by directing you to jello's post.

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I'm glad you posted that. This quote is from a highly placed source at myFICO concerning this chart:

"Not only is that a "partial" scorecard, it's fake, and used mainly to illustrate how a scorecard works.  Do they really think we'd put the real deal out there like that?"

So that takes care of this supposed new information. 

[vanillabean]

I trust though that we can rely on FICO reveals how common credit mistakes affect scores?

[MarineVietVet]

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@Anonymous-own-fico wrote:

I trust though that we can rely on FICO reveals how common credit mistakes affect scores?

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I would think so since the article quotes an employee of FICO.

[RobertEG]

While all that has been said about %util being the key factor as opposed to CL is true, the huge advantage to a higher CL card is not in the static, "today" consideration, but in the "tomorrow" consideration.

When a consumer uses his card,the higher CL is a buffer against the % util impact on individual card scoring.

The same charge on a $500 CL card has much higer impact on that card's % util than the same purchase on a much higher CL card.

That is the reason why lower CL cards are so hard to manage.

I am quite happy to overrate my higher CL cards.

As for the relative impact of AAoA vs the other advantages in adding her as an AU, with only one revolving LOC, she is most likely also suffering from lack of multiple revolving.

That is both a credit mix and a % revolving with balance issue.  Having one card, she is always at either 0 or 100% cards with balance.

With AAoA being only a part of a roughtly 15% scoring category, I would give it a shot and see if the increased CL flexibility cushion and improved overall % util along with the improved mix of credit and % cards with balance factors would offset any AAoA reduction.  My speculation is that it would.

She can always be removed as an AU should the impact not be as expected.

But dont ignore the fact that having an AU credit history of another on her report will make it impossible for credtiors to then evaluate her own personal credit risk based on only her own credit history.  Creditors know that an AU-based score is usually inflated.

[Anonymous]

Thank you all so much for the advice -- I really appreicate it.