Poor Credit Score- Too many recently opened accounts?

Question

I ran a credit report on a applicant, and it flagged the applicant for having too many recently opened accounts in proportion to total number of accounts. And, it also flagged that the length of time of bankcard accounts have been established is too short.

But, I don't understand why this would be a red flag. What's wrong with opening up a new account that the credit report is flagging it twice? When I read the score factors, this new open account is the first thing listed as if its the most important factor.

There's only 1 tradeline, ie credit account with a credit limit of $700, and that was opened a few months ago.

Several banks did inquiries into his credit a few months ago, before he opened that tradeline. Should it be red flag that several banks ran inquires on him?

Given this information, is there anything any reason why you wouldn't accept this applicant.

Chris Mason · Answer

The story that applicant's credit, from what you have said, tells, is just that she or he is young and hasn't borrowed a lot of money before. That's OK. That is not a bad thing. "Thin credit" reports are very sensitive to the littlest stupid thing. Several banks ran his credit because he was trying to establish credit, and no one would give him a shot. So he had to ask around a bit.

But, from what you have said, she or he hasn't done anything 'wrong.' He or she is just young.

But, from what you have said, she or he hasn't done anything 'wrong.' He or she is just young.

Andrea Collatz · Answer

Hi @Dana R.

We emailed you a response for your specific application but I wanted to follow up here as well:

• Tradelines are credit account records that are provided to credit reporting organizations. A tradeline can include a mortgage, line of credit, credit card, or any other credit-related item that is provided by a financial institution or lender. It is possible for an individual to have an account that goes to collections but does not appear on a tradeline if it is with an entity the individual does not have a credit account with, such as in the case of a medical bill that goes to collections.
• SmartMove does not take income into account in the leasing recommendation. The recommendation is based only the credit report.

If you have any other questions please let us know. Thanks!

Rick S. · Answer

@Dana R. I am tagging @Andrea Collatz so that she sees your question from today as I am sure she can assist still.  Please let us know the results as I would be interested to know also.  Thanks.

Russell Brazil · Answer

Base the decision on the credit score as opposed to the information in the report

Steven J. · Answer

This could also be a change of times for this older person. In my market if you don't have 600 credit or better you are living in the dumpiest of slumlord owned rentals. I'm amazed how often I get people who haven't been renting in my area who have no credit and are shocked they can't find a place to live. I've had young couples that seem like good people who only realize now they need credit because in Alabama it wasn't looked at. I've had older folks (elderly) who have always used cash get frustrated because they've lived 60 years with no financial problems but now can't find housing because there isn't a credit record. And of course there is the young folks just out of college who haven't yet built any credit because they were never taught its importance.

Personally, if everything else checks out I'd likely look past the multiple inquiries. My guess is his $700 limit one of those beginner cards where you have to put up your own money first to have that limit in the first place. Can't remember the name but my girlfriend had to start that way because she didn't start building credit until after college.

Thomas S. · Answer

Something happened in his past that he has diligently cleared from his credit record. At his age this is a bad sign and if you have found any other acceptable applicants you would be best to pass on this guy. No credit, thin credit are signs of something. You must determine what It is or play it safe and pass on the applicant.

I generally do not waste my time investigating and prefer to reduce my risk by passing.

Dana R. · Answer

Hi Andrea,

I just saw your response, and I'm hoping its not too late to get an answer.

After calling TransUnion number and talking to one of your representatives, that was my understanding about the lack of negative treadlines. Otherwise, how could an applicant with several collections not have any negative treadlines in their history?

But, I'd love to hear the correct answer.

Also, I was reviewing that application and I noticed that the income was obviously inflated. Would an inflated, false income affect the Smartmove's recommendation whether or not to rent to a tenant?

In other words, if the applicant had red flags that might recommend a rejection, can the SmartMove Score be manipulated to giving an accept if the applicant put in a inflated income?

Andrea Collatz · Answer

Hi @Dana R.

I'm a representative with TransUnion SmartMove. Typically, closing a tradeline should not wipe out the negative information. If you send me a note on BP or an email with the application number we can look into this directly. Thanks!

Dana R. · Answer

I called Smartmove, and the tradeline data is totally counter intuitive.

The 0 negative tradlines, 0 treadlines with any historical negatives, and 0 occurrences of any historical negatives is only referring to the treadline they currently have open and not any treadlines that have been closed.

So, if a applicant has really bad credit, all the applicant needs to do is close that treadline and open a new treadline to wipe it off. Of course, they'll get flagged for having opened a new account but that's better than showing a treadline with all your bad credit or late payments.

The more I think about it, a relatively new treadline can potentially be a red flag if an applicant is doing it to scrub clean a history of late payments. And, if the treadline is new like if its only a month old, of course it won't show any late payments for 30 days, 60 days, 90 days.

You might be able to spot it if the applicant also has a collection, but a applicant could have a history of late payments without crossing into collections.

Rick S. · Answer

@Dana R. I would expect that tradeline to appear as a negative tradeline on the report still.  The historical negatives could still be 0 if there was no payment history for past 24 or 48 months, whichever range SmartMove uses, but the status of the tradeline should still trigger a negative I would imagine.  I know there is a SmartMove rep on BP sometimes so let me see if I can have her research your question.

Poor Credit Score- Too many recently opened accounts?

Most Popular Reply