Fallacy of FICO as a Credit Worthiness Indicator

[ChuckinCO]

I have no debt.  I have paid off 3 mortgages and own my homes free and clear. I pay my single credit card off each month and have never paid interest on unpaid balance.  I have an excellent income and never have missed paying a bill yet my credit score is slowly eroding from 860 to the mid-700s.  The reason I'm given is that my credit card balance is too high.  I use that card for business travel and always pay the entire due balance, but my credit score keeps going down. 

The most recent reduction was accompanied by the reason that the change was due to a lack of payment history!  I have 50 plus years of payment history and just finished paying off a zero-interest car loan last year, so where's the lack of history? The suggestion was that I take out a loan! What a farce in suggesting the solution to solving a credit score problem is to take on debt.

This shows that the FICO score is not a valid indicator of credit worthiness and that it is prejudicial toward those who manage their finances and credit well.

[llecs]

I suspect you're looking at a non-FICO score because FICO tops at a max of 850, below your 860. In fact, many of the FICO versions out there don't even hit 850 and are below that on the high-low range (820s, 830s). FICO also factors in your closed accounts provided they show on your report. There are some non-FICO scores that ignore closed accounts which can also account for the trend you are seeing. I definitely would discourage getting into any debt for the sake of any credit score. It's not needed. 

Most lenders out there have some sense of intelligence and will objectively look at your credit, score aside. Based on what you said, you're in great shape. Congrats!

[kkapdolee]

Some FICO scores go up to 900 (Bankcard Enhanced FICO scores) and some go to 950 (FICO NextGen). They can be obtained when you apply for a CC or loan by certain banks (CITI and Chase for Bankcard and PenFed for NextGen) and either get denied or don't get the best rates. Which FICO scores each banks use may differ by location but at least from my personal experience, CITI and Chase have always used a bankcard enhanced score and PenFed has always used NextGen.

[crunching_numbers]

Welcome to the forums ChuckinCO!

Where did you get those scores from? There is a possibility that you are not comparing apples to apples. There is also the possibility that you might be seeing a score that is not a FICO, but a "for educational and entertainment purposes" credit score. Getting the score from a credit bureau does not mean it is a FICO score.

In addition, it is true that not enough credit in the eyes of FICO can hurt your score. Having only one credit card can affect your score.

As far as your bill payment strategy, never pay interest or take on debt to try and raise a credit score. There is a timing issue that affects your FICO score regarding bill payment. To maximize scoring, you need to pay your charges BEFORE the statement cuts. In other words, you make charges throughout the month, then pay them before the statement due date. Some will say that leaving a small balance (several percent, there is debate about what is optimal) on only one credit card will maximize your score.

From what you described, you are right that lack of payment history as a reason does not make sense. This is another reason I suspect you may not be looking at a genuine FICO score. Credit bureaus will still show your history of a mortgage for 10 years, and FICO will still see it as participating in your mix of credit. Credit scores that are not FICO (called FAKO on this site) will drop your score if your mortgage is paid off and not an active loan, while FICO does not. This is another indicator that you may not have a genuine FICO.

We are here to help you figure out your situation, and the people on this board are helpful, non judgmental, and versed in FICO information. Give us a bit more info and we will help.