Account Payment History Too New to Rate |
By Kenneth Long on May 27, 2010
.jpg.aspx?width=75&height=75)
Many consumers that are new to consumer credit find that it is hard to open new accounts when they have a limited credit history. Lenders really want to see that you have an established credit history as proof that you can be trusted to maintain a new credit account in good standing.
While you might feel that six months is enough time to prove yourself, it can take much longer for credit bureaus to reward your good habits. FICO credit scores reserve 15% of the formula to reward long-term borrowers. It may take 2 years or longer before an account is seasoned enough to provide substantial benefit to your scores.
As long as you have at least one seasoned account, then you probably can be scored. However, a scoring error may occur if no seasoned accounts are yet a part of your credit history.
Your scores will likely drop initially whenever you apply for or open a new line of credit. This is due to the roughly 10% of the FICO scoring formula that is based on new credit.
Your payment history itself is the most important component of credit scoring. Fair Isaac Corporation reserves 35% of the scoring formula to reward consistent payers.
If you have been denied new credit because your existing credit accounts are simply too new to rate, then you should consider delaying any new credit applications for a while. Instead, focus on making sure that your existing credit accounts continue to report positively.
You can do this by ensuring that all payments are made on-time. Additionally, you should avoid accumulating large balances on your lines of credit, since high credit utilization rates can lower your credit scores.
Finally, when you do apply for credit, make sure that you are taking the appropriate step. Going from a store card to a mortgage is a mighty leap, but going from a credit card to a modest car loan is a more realistic step up.
While it may be frustrating to have to wait on opening new credit accounts until you have established a lasting credit history, it can help you build good habits. Those habits are what will help you manage multiple lines of credit as your credit and earnings grow.
Join the Discussion at the Credit Forum: Account payment history is too new to rate
Account payment history is too new to rate is Code 7 for FICO-based credit scoring products used by the major consumer credit bureaus. It also appears as code A0 in Fair Isaac's NextGen risk scoring system. For more information on credit scoring, see the complete list of credit score factors.
|
Current Rating: 0 (0 ratings)