Time Since Most Recent Account Opening is Too Short |
By Kenneth Long on August 19, 2010
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If you just opened a new credit account, you probably should think twice before applying for any new credit. Lenders consider consumer credit as a privilege and a responsibility that must be taken seriously.
A smart consumer only opens a credit account when it is advantageous to do so and only within their ability to manage that account. A consumer that opens several credit accounts in a short period of time is either desperate or foolish. Either way, lenders get nervous.
They know that even smart consumers may attempt to open multiple credit accounts in a short period of time when some sort of crisis has occurred in their personal life. A job loss for example might scare someone into opening multiple credit accounts to help them meet their other monthly obligations. If they do not quickly become gainfully employed, they risk defaulting on massive amounts of debt.
This reason code is part of the 10% of credit scoring formulas that take new credit into account. You can expect a small drop of up to 5 points from your credit scores when you open a new account. If you apply for another credit account in a short period of time, that signals a potential financial crisis that may be occurring. Also, the 15% of your credit score that depends on duration cannot be maximized until your newest account has a chance to age.
Any lender that you apply for credit with will review your credit report to make sure that you meet their eligibility requirements. They want to screen out applicants that have too high a risk of default. Of those who they do approve, they want to use risk-based pricing to maximize profits and to offset various levels of risk.
If your credit scores have been impacted by this scoring reason, then you likely have applied for new credit within fewer than 6 months after your last credit account was opened. A related risk factor is if you apply for too many accounts within a 12 month period. It is common to see both risk factors on the same credit profile.
This is an easily correctable situation. You simply have to avoid opening any new accounts if your last credit account was opened within a reasonably short period of time. Between 6 and 12 months is the minimum period of time that most consumers should wait after opening a credit account before they apply for another.
Join the Discussion at the Credit Forum: How long should you wait between account openings?
Time since most recent account opening is too short is credit bureau risk score reason 30. NextGen code K2 applies to this risk factor. For more information on credit scoring, see the complete list of credit score factors.
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