EQ FICO Simulator - Pay Down Revolving Debt Options

[Anonymous]

Does anyone know the difference between option 1) Pay $X every month for  1 month, and option 2) Pay $X of your total revolving balance under "Pay Down All Your Credit Card Balances" in "These Actions Usually Help Your Score" on Equifax's FICO Simulator. 

I am getting a 40 point difference between 1) Paying $1408 every month for 1 month, and 2) Paying $1408 of my total revolving balance period.  The same pattern between the two options (option 1 is higher by 40 to 50 points) exists paying the same total amount over a period of months as well.  The balances are chargeoff credit cards (just over 4 years old).  Any ideas on which simulated option is more reliable?

[MeganML84]

I have *heard* paying off over time gets a better score increase overall, however I have not tested this theory.

[Anonymous]

For revolving debt its the same. Time increase score by it's self.

Pay off debt with 1 big payment and wait 6 months = score X
Pay off debt in pieces over 6 months = X

Time has it's own rewards with FICO even if you don't carry a balance. The time factor is figuring for new accounts getting older and inquiries falling off. It's general not for any specific profile. But anyway I'd pay off debt as fast as you can on all revolving accounts.

Message Edited by ilovepizza on 10-18-2007 07:22 PM

[haulingthescoreup]

OK, well, it's been a long day, and I really didn't get any of that.

Are you saying that the simulator is wrong, and you don't get better scores by dribbling out a repayment over 24 months? Because I asked that on my re-bucketing thread. It doesn't make sense to me that by paying off my whopping $840-something balance over 24 months at $35.xx/ month, I would get significantly higher scores, but I can assure you that this is what the simulator says. And here OP is being told the same thing.

My only guess is that what the sim is trying to say is that we should always/ consistently/ repeadtedly/ whatever-ly pay down and keep paying down our balances, not drag one month's worth out over 2 years. Or is it saying something else?

And yes, I know that the predictions aren't gospel, but this is just plain weird.

[RobertEG]

Really quite simple, and exactly as pizza has said.  Scenario 1 only includes one month of account aging, and scenario 2 includes three months of account aging.  In addition to account aging, Scenario 2 will also take into account the dropping of inquiries going over one year within that three months.  %util may end up the same, but other factors are considered.  The scenario is NOT saying it is better to wait to pay off debt, or to string it out over a number of months.  It is saying that aging is also imiportant, and based on all factors in your CR may have a significant impact.

Message Edited by RobertEG on 10-18-2007 08:37 PM

[haulingthescoreup]

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@RobertEG wrote:

Really quite simple. Scenario 1 only includes one month of account aging, and scenario 2 includes three months of account aging. In addition to account aging, Scenario 2 will also take into account the dropping of inquiries going over one year within that three months. %util may end up the same, but other factors are considered. The scenario is NOT saying it is better to wait to pay off debt, or to string it out over a number of months. It is saying that aging is also imiportant, and based on all factors in your CR may have a significant impact.

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Well then, that's what it should say! That certainly makes more sense to me, but here's the message that we get:

Best Action - Pay Down 90%-100% of Your Credit Card Balances - Over the Next 24 Months

How you manage your revolving accounts (credit cards, department store credit cards, revolving lines of credit) is heavily weighted in the FICO score. FICO scores evaluate your revolving accounts in a variety of ways, including comparing your balance to your available credit, as well as looking at the number of accounts with a balance. A general rule to remember: consistently carrying lower balances on your revolving trade lines will generate positive points for your score.

This simulation was based on your paying down 90%-100% of your overall credit card balances over a period of 24 months. In general, your score will be helped as your credit history lengthens and you establish FICO healthy behavior. ***So this score simulation took into account both your lower balances and the aging of your credit history.***

--I'm on Firefox, so I can't do fancy things to highlight, so I asterisk'd the last sentence. That's the only place where they refer to aging of credit history.

They could be a bunch clearer about this, IMO. Although I suppose I'm cheered up that I thought that this is what they meant.