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Frequent Contributor
Posts: 451
Registered: ‎10-02-2011
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Re: How many credit points a credit card contributes in a month to the credit score


RobertEG wrote:

FICO scoring is multi-category, so accounts factor into many different considerations. 

 

Having multiple revolving is important, as FICO places heavy emphasis on showing the effective use of discretionary credit, and that is usually the first type of payment a consumer will become delinquent in paying should bad times come about.  FICO is a risk of repayment analysis, so it is a highly weighted factor.

How many is ideal is a matter of conjecture, as FairIsaac has not disclosed the innards of their scoring, but it is clear that at least two are important.

 

In calculation of util of credit, FICO places much greater weighting on util of revolving than upon % balance owed on installment accounts of orig loan amount.

The emphasis is skewed to the point that most will advise not to be concerned with installments in scoring of util of credit.

FICO has stated that there are three main sub-categories in scoring of revolv util.  One is overall revolving % util, the second is the conbined % util of each revolving account, and the third is the % of revolving carrying a monthly balance.  The precise weighting of each sub-category is, again, a FICO trade secret, but it appears that overall % util is given the most, with combined % util on individ cards second, and % with balance third.

 

A simple look at % revolv with a balance shows that the number of revolving can most certainly affect scoring.  Having only two revolving means that the consumer is always at either 0%, 50%, or 100% carrying a balance.  With three revolving, the distribution expands to 0%, 33%, 66%, and 100%.  And so on.

With increased number of revolving accounts, the impact of one or two carrying a balance can be offset by the higher denominator.

 

Having a larger number of revolving can also be a guard against maxing-out one account should a large purchase be necessary, as most cards permit balance transfers that permt movement of balances between accounts.

It can also, as the age of existing accounts mature, serve as a smoothing factor in calculation of average age of accounts when new credit is added

Having, for example, 5 CCs with good age will offset the negative effect of a new TL on AAoA more than having only one or two CCs.

 

As for "gaining points" each month, that is done primarily in FICO scoring by improved age of accounts.  More accounts with higher age, again, contribute more to building average age of accounts than does having only one or two.

 

I would not simply scoring by assuming that one gets no favorable results for CCs greater than two.

 

 

 


There you go .This what i was trying to understand and you have help me alot understanging how the fico brain works.Thank you


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Valued Contributor
Posts: 1,058
Registered: ‎03-22-2012
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Re: How many credit points a credit card contributes in a month to the credit score


RobertEG wrote:

FICO scoring is multi-category, so accounts factor into many different considerations. 

 

Having multiple revolving is important, as FICO places heavy emphasis on showing the effective use of discretionary credit, and that is usually the first type of payment a consumer will become delinquent in paying should bad times come about.  FICO is a risk of repayment analysis, so it is a highly weighted factor.

How many is ideal is a matter of conjecture, as FairIsaac has not disclosed the innards of their scoring, but it is clear that at least two are important.

 

In calculation of util of credit, FICO places much greater weighting on util of revolving than upon % balance owed on installment accounts of orig loan amount.

The emphasis is skewed to the point that most will advise not to be concerned with installments in scoring of util of credit.

FICO has stated that there are three main sub-categories in scoring of revolv util.  One is overall revolving % util, the second is the conbined % util of each revolving account, and the third is the % of revolving carrying a monthly balance.  The precise weighting of each sub-category is, again, a FICO trade secret, but it appears that overall % util is given the most, with combined % util on individ cards second, and % with balance third.

 

A simple look at % revolv with a balance shows that the number of revolving can most certainly affect scoring.  Having only two revolving means that the consumer is always at either 0%, 50%, or 100% carrying a balance.  With three revolving, the distribution expands to 0%, 33%, 66%, and 100%.  And so on.

With increased number of revolving accounts, the impact of one or two carrying a balance can be offset by the higher denominator.

 

Having a larger number of revolving can also be a guard against maxing-out one account should a large purchase be necessary, as most cards permit balance transfers that permt movement of balances between accounts.

It can also, as the age of existing accounts mature, serve as a smoothing factor in calculation of average age of accounts when new credit is added

Having, for example, 5 CCs with good age will offset the negative effect of a new TL on AAoA more than having only one or two CCs.

 

As for "gaining points" each month, that is done primarily in FICO scoring by improved age of accounts.  More accounts with higher age, again, contribute more to building average age of accounts than does having only one or two.

 

I would not simply scoring by assuming that one gets no favorable results for CCs greater than two.

 

 

 


This man right here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ he knows what he is talking about!

 

I have always heard that you need a minimum of 3 CCs to maximize your scores. Robert also brings up a good point that by having more credit cards it will help in keeping your AAoA up when you apply for new credit down the road.



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