Is it likely that I take a 40point hit?

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Elijahmex
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Is it likely that I take a 40point hit?

Postby Elijahmex » Thu Feb 11, 2016 12:55 pm

So I've had credit for exactly a year now. I have a Cap1 Quicksilver and just app'd for a Discover card yesterday and was approved with a low limit but that's ok.

I called TU to get my updated score and it's currently at 742 (EX 729, EQ no clue), utilization is at 4%, 4 inquiries and I think that's all the relevant info you need.

What worries me is that the CSR told me to expect a huge decrease in CS come march due to the account I've just added to my very thin file. Is this likely?

I knew to expect an HP thus a decrease in my CS but another decrease bc I added a new account? It does not make sense to me. I've never heard of such a thing.

Can someone shed some light?
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4ktvs
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Re: Is it likely that I take a 40point hit?

Postby 4ktvs » Thu Feb 11, 2016 1:37 pm

I have no idea what kind of point loss you will see but yes adding any new account hurts your credit score when it reports. The idea behind it is every new account is a new default risk. The banks don't read your mind, they just look at the report and make what they believe is a logic based risk assessment based on study's done on the subject.

I wouldn't worry about it as over time this new account will age and help build your credit report. Sometime one must take a small upfront hit to reap the long term reward. In this case being the building of a credit history.

Elijahmex
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Re: Is it likely that I take a 40point hit?

Postby Elijahmex » Thu Feb 11, 2016 1:40 pm

4ktvs wrote:I have no idea what kind of point loss you will see but yes adding any new account hurts your credit score when it reports. The idea behind it is every new account is a new default risk. The banks don't read your mind, they just look at the report and make what they believe is a logic based risk assessment based on study's done on the subject.

I wouldn't worry about it as over time this new account will age and help build your credit report. Sometime one must take a small upfront hit to reap the long term reward. In this case being the building of a credit history.


That makes sense. Appreciate the clarification buddy
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Vattené
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Re: Is it likely that I take a 40point hit?

Postby Vattené » Thu Feb 11, 2016 2:21 pm

You'll take a hit from the HP as you mentioned, but you'll also take a hit from having a new account drag down your AAoA. You'll recover from it over time as the account ages, and (provided good behavior) the added history will help you over time; it's just the short term that will be negatively impacted.

There are too many factors for anyone to be able to tell you how much of a dip you will see, but I wouldn't be surprised by a 40 point drop for a thin profile. Don't worry, though, it will come back :cheers:
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

Elijahmex
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Re: Is it likely that I take a 40point hit?

Postby Elijahmex » Thu Feb 11, 2016 3:02 pm

Vattené wrote:You'll take a hit from the HP as you mentioned, but you'll also take a hit from having a new account drag down your AAoA. You'll recover from it over time as the account ages, and (provided good behavior) the added history will help you over time; it's just the short term that will be negatively impacted.

There are too many factors for anyone to be able to tell you how much of a dip you will see, but I wouldn't be surprised by a 40 point drop for a thin profile. Don't worry, though, it will come back :cheers:


A year ago i started at 580 and 12 months later I made it to 742. I didnt do that by not worrying. It just hurts to hear that I will take a huge hit even if in the long run it will be beneficial. Just gotta deal with it now sigh...
Thanks for the info though :cheers:
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Vattené
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Re: Is it likely that I take a 40point hit?

Postby Vattené » Thu Feb 11, 2016 4:11 pm

I get that. It's good to be concerned about your credit and acting proactively, too. If it's any consolation, the only way to never allow for any decreases to occur would be to never get any new credit - and even then in the long term you would be worse off score-wise if you did this. Credit is a long game. It also takes your complex financial history and reduces it to a number. A score dipping temporarily doesn't really mean you're less financially healthy or more likely to default on your debt, it's just a change in a numerical output based on the many factors that go into the model. It is frustrating, but if you're not applying for a mortgage in a few months, chances are it will have no measurable impact on you whatsoever.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

takeshi
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Re: Is it likely that I take a 40point hit?

Postby takeshi » Fri Feb 12, 2016 10:05 am

Elijahmex wrote:A year ago i started at 580 and 12 months later I made it to 742. I didnt do that by not worrying. It just hurts to hear that I will take a huge hit even if in the long run it will be beneficial.

I get what you're saying but you can't just expect constant score increases -- especially if you're building. You don't want to tank your scores when opening new accounts (i.e. add accounts as you need them and as your profile can handle them) but you have to expect that there will be smaller short term hits along the way. The old saying is "you can't make an omelette without breaking eggs".

As stated above, we have no idea what the scoring impact will be for you. With a thin and young profile you will generally see bigger impacts. This is a long, slow process and you're just starting out even a year in.

Don't just obsess over the numbers. They will go up and down even as your profile thickens and ages. My oldest accounts are 18 years old, my FICO 8's are above 800 at the moment but I've seen swings of up to 30 points. The score at a given moment doesn't really matter as much as the worry you're putting into it unless you're applying for new credit. Keep in mind that it is never just about score. Focus on the data in your reports. Keep an eye on your scores as well but worry when you're ready to app and as you're approaching an app, CLI, etc.

Elijahmex wrote:I knew to expect an HP thus a decrease in my CS but another decrease bc I added a new account? It does not make sense to me. I've never heard of such a thing.

It doesn't make sense to you because you don't understand how credit is assessed and need to educate yourself. For some reason people tend to obsess over HP's but HP's are just one factor among many and not even the most significant factor.

Any score is generated based on the data in a report. When you apply you incur an HP and it shows up on your reports almost immediately. When it shows up on the report the HP has an impact on your score since it changed your report. New accounts do not immediately report. When the account reports it also has an impact on your score but there are multiple factors at play when the new account reports. Many see a reduction in score due to a new account but it really depends on one's credit profile and the specifics of the account. It is possible to actually see a a scoring increase due to a new account under specific conditions where the positive factors significantly outweigh the negative factors.

This is a just a starting point and it only covers how FICO typically weights the factors. It does not contain all the info you need to know. It is just one resource.
http://www.myfico.com/crediteducation/w ... score.aspx

HP's fall under New Credit. Note the typical size of that factor. AAoA falls under Length of Credit History. Note the size of that factor. Your recent credit seeking activity also falls under New Credit. Since you have a thin and young profile these weights aren't necessarily right for you and you can see bigger impact from New Credit. The limit and balance on the new account play into your Revolving Utilization which falls under Amounts Owed. I may not be covering every possible factor involved with applying and having a new account report but it's a matter of how all the factors add up in addition to your existing credit profile. A score will consider all the data in your report at the time the score is generated to come up with the number it produces.

Elijahmex wrote:What worries me is that the CSR told me

...and all that said, keep in mind the CSR's can mistaken and misinformed. CSR's are not necessarily underwriting experts or FICO experts. Educate yourself and use that knowledge to assess your own reports. Yes, you can also be mistaken but you'll want and need that knowledge if you intend to improve your credit. We're all constantly learning.

JonE
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Re: Is it likely that I take a 40point hit?

Postby JonE » Fri Feb 12, 2016 12:48 pm

I think it's worrying about nothing. The worst hit I've taken after applying for credit was 5 points off my score. In some cases my scores went up or didn't move at all. I had a fairly thin file before I started rebuilding, even my EQ only shows 12 months credit history at this point. If your utilization goes up dramatically, that's when you'll have issues.
Current Cards: Chase Freedom, Discover IT
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Dcyphrz
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Re: Is it likely that I take a 40point hit?

Postby Dcyphrz » Fri Feb 12, 2016 7:26 pm

Elijahmex wrote:A year ago i started at 580 and 12 months later I made it to 742. I didnt do that by not worrying.

I know the worry you speak of. LOL You seem to be doing a lot of the right things. Breaking the 700 barrier within a year is awesome IMO. Kudos. :)
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EX 756 - TU 776 - EQ 749

Elijahmex
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Re: Is it likely that I take a 40point hit?

Postby Elijahmex » Sat Feb 13, 2016 9:57 am

Appreciate all your input. So far so good. I still have a lot to learn & I'm thankful for this forum. Y'all been a great help :cheers:
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