@Anonymous-own-fico wrote:
Sure, we are familiar with the logistics of various tricks to fine-tune the score, but that doesn’t explain why such hoops should be necessary. Knowing that you get a slight bump for paying off a card as opposed to having a small balance doesn’t mean we know why. I wouldn't say it's logical either; it pertains to some situations and not to others.
I'm saying it's logical to expect that paying off your credit makes you a good credit risk. It's also logical that you're a better credit risk when you don't owe a bunch of people. It not logical that you become a worse credit risk as soon as you pay everyone off (i.e the leave on card with a small balance).
Without complicated algorithms, we would expect these things to be true. Perhaps I should say that to me it's logical, especially before all the electronic monitoring and payment of bills.
Previously, people relied upon snail mail to receive their statements and to pay their bills. Sometimes the mail wasn't delivered or was set aside to open later. Thus, if you had many bills showing up in your mail on different days and due different days, it was more likely that something could be over looked. Add to that mix that credit cards had the right to change your due date every cycle (CRPB and laws changed that). As a consumer, you felt they played with your dates in the hopes of charging you a late fee, but in a way that didn't mess up your credit. You asked your creditor for a specific due date, but some creditors wouldn't do it.
I think the FICO 08 & 09 models are changing, because the method consumers use to verify and pay bills are changing and consumer protection has made it easier for consumers to have a handle on their bills. Thus, you can now have multiple cards and keep track of them, because the due dates aren't moving, you get alerts, you use mint, auto pay, and numerous other electronic methods to stay on top of your bills. It's no longer true that people with more than 5 cards are likely to have bills get out of control.
However, it still doesn't change that if I only owe 3 people and an issue occurs, I'm more likely to still pay the 3 people. Because small amounts every where ($2 - $70) may be considered negligible so I may not even put them in my budget, but $200- 1000 per month bills I definitely add to my budget. Thereby, additional reasons that having only 1 -2 cards with a balance is better than having small balances on all cards. To me that's logical.
Original Mortgage maturity Sept 2044; Refi maturity Dec 2030
Starting Score: EX 751 EQ 720 TU 737 on 4/9/14
Current Score: EX 849 EQ 835 TU 843
Goal Score: 850Take the myFICO Fitness Challenge
