What I don't get about backdating

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CarefulBuilder14
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What I don't get about backdating

Postby CarefulBuilder14 » Sat Jul 26, 2014 5:31 pm

I can understand how a high AAoA is good in a lender's eyes and how it raises a FICO score. What I don't get is why backdating has any real value in a lender's eyes. If a potential lender looks at a credit report, he or she can see that a particular Amex account may appear to go back a long time but has no activity before a certain date. Why wouldn't a lender just adjust their own credit metrics to account for the fact that Amex is doing a little AAoA manipulation? Or is the idea that it works if the lender gets a FICO score but not a credit report?
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Postby yfan » Sat Jul 26, 2014 9:04 pm

Simply because the score itself matters - most lenders don't spend a lot of time looking at your credit report other than the negatives. They look at the score.

The incentive for Amex is that when their customers are happy, they get more loyalty, more swipes and make more money from the transactions!

flan
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Postby flan » Sat Jul 26, 2014 9:45 pm

CarefulBuilder14 wrote:I can understand how a high AAoA is good in a lender's eyes and how it raises a FICO score. What I don't get is why backdating has any real value in a lender's eyes. If a potential lender looks at a credit report, he or she can see that a particular Amex account may appear to go back a long time but has no activity before a certain date. Why wouldn't a lender just adjust their own credit metrics to account for the fact that Amex is doing a little AAoA manipulation? Or is the idea that it works if the lender gets a FICO score but not a credit report?


Many (these days, probably all big lenders) lenders do get a full report, and use a bunch of different metrics on it. For some reason, they don't tell me what they do, but I'd not be surprised if at least some them look at the actual number of months with payment info.

Also, age of accounts isn't all that big a deal. It is, according to fico's press statements (which are of dubious actual accuracy), about 15% of the score, and from watching my scores, there's a sharply diminishing factor once your average age is in the two or three year range, so most backdating doesn't matter much.

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Postby CarefulBuilder14 » Sat Jul 26, 2014 9:53 pm

flan wrote:Also, age of accounts isn't all that big a deal. It is, according to fico's press statements (which are of dubious actual accuracy), about 15% of the score, and from watching my scores, there's a sharply diminishing factor once your average age is in the two or three year range, so most backdating doesn't matter much.


That does make sense. If a person has been on time with all their bills in the last three years, that's a pretty good indication they are at least organized. Of course, a bankruptcy five years in the past might tell a different story of financial health.
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Postby flan » Sun Jul 27, 2014 8:35 am

CarefulBuilder14 wrote:That does make sense. If a person has been on time with all their bills in the last three years, that's a pretty good indication they are at least organized. Of course, a bankruptcy five years in the past might tell a different story of financial health.


Average age of accounts is entirely different from payment history. Bankruptcy is another, entirely different, thing from either. (It's possible, though very unusual, to go bankrupt without having a negative payment history. I'm actually not sure bankruptcy, per se, is reflected in a FICO score, but it's a drop dead no-way-dude flag for many lenders.) If you have bunch of lates, an average age of accounts that bolstered by a pocket full of amexes backdated to 1066 isn't going to help you.


The importance of lates does decrease over time, at least for 30 and 60 day ones, and one or two that are more than four years old won't hurt you too much. More than a handful, or 90 and 120 lates, and you're hosed. The handling of lates is something that varies widely between models (even between different FICO models). The usual point of a score used for new accounts is "how likely is this person to become 90 days late in the first N months" (N is usually 24, but can be different, depending on the product invovled.), and long lates make it more likely. Short lates, to some point, don't.

Once they decide to approve you, most lenders use a different set of criteria (a different score, or a combination of scores, or something proprietary) to figure out what your rate and limits will be. For instance, a lender might approve two people with the same fico and incomes, one with a history of lates, and one not, and give the guy with lates a higher interest rate and higher limits -- because he carries a balance and pays interest. or they might not, because they have different goals for the product.

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Postby MemberSince99 » Sun Jul 27, 2014 9:23 am

Did they have Amex in 1066?

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Postby flan » Sun Jul 27, 2014 6:00 pm

MemberSince99 wrote:Did they have Amex in 1066?


How do you think the Normans paid for Hastings?

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Postby MemberSince99 » Sun Jul 27, 2014 6:30 pm

I thought maybe they might have pulled out their Visa Signatures?

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Postby CarefulBuilder14 » Sun Jul 27, 2014 7:36 pm

flan wrote:How do you think the Normans paid for Hastings?


Maybe the legions of the still-standing Eastern Roman Empire lent them a few Centurions...
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
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Letting new accounts cool off since May
Really not sure what I'll add next or when



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