Understanding FICO® Scoring

[ztnjpv]

My FICOs dropped in my recent update because the number of accounts with reported balances went from 5 to 6. Apparently, this lowers your score. Not sure if there is something in particular about 6 accounts but at 5 accounts with balances, this was not an issue. It could be a percentage of open accounts or total accounts. 2 of those accounts are loans as well. In total, I have 8 open accounts on all 3 of my reports (6 card, 2 loan).

[llecs]

IME, I got red flagged when half of all of my accounts on the Accounts page reported a balance. I think YMMV though.

[bettercreditguy1]

I had the same "flag" last month even though my utilzation was < 2%. So this month, I had less than 1/2 of my ccs report and my scores increased 17 and 18 points respectively, (TU, EQ). Imho, I believe the formula "thinks" that you are accumulating debt.

[OhioCPA]

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llecs wrote:

IME, I got red flagged when half of all of my accounts on the Accounts page reported a balance. I think YMMV though.

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+1

The ding occurs at half of open revolving accounts reporting a balance. There is also a ding for more than one revolving account reporting a balance.

[dddewdrop]

        I recently answering a new person's question on this site concerning this issue. I recommended to them to keep the number of accounts to a minimum having at best just one credit card reporting a balance of < 9% util.  I was then corrected by someone that this is one of those YMMV things. That some people will have better results or equal results if all of their accounts or more than one of their accounts has or have small balances. 

       Armed with this info, I decided I wouldn't focus as much on keeping tiny balances on my credit cards which I am not using. I used to be be in huge debt and now I am not. I am keeping a small balance reporting on one card and nothing on the other and leaving it at that. My (revised) understanding of all this is that it can vary by bucket, which is sort of my catch all explanation for variances in the fico model that I can't explain. To the original poster of this thread I would say, are you sure that this is what lowered your credit score that one of them stopped reporting a value over 0? Are you sure something else didn't change? You aren't the first person to report this scenario but it is a little counter intuitive or different from what other people seem to report.... 

      In my mind, I am focused on not having any credit card debt and paying off my cards in full on time. I know if I do that then I will contribute to improving my score. From this site i have learned to go out of my way to leave a little balance on one card so that it shows that I am using my cards at least a little bit. In addition to that, I have been making a small charge or two on each card every once in a while, in hope that this will keep them "active" and in hopes that this will keep the company from closing them due to inactivity. Beyond that I don't use credit cards. I prefer to use cash.

[ztnjpv]

bettercreditguy1 said:

"I had the same "flag" last month even though my utilzation was < 2%. So this month, I had less than 1/2 of my ccs report and my scores increased 17 and 18 points respectively, (TU, EQ). Imho, I believe the formula "thinks" that you are accumulating debt."

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Yep. Similar experience in reverse. My last TU FICO about a month ago was 785. I had the same number of open accounts but 5 had balances. The other day when I updated, a 6th had a balance and my score dropped to 769. Grrr. The utlilization increased from 2% to 4%. Still small. But the number of open accounts with balances was specifically listed this recent time as a negative factor in my score. It's the only reason I even realized it was a factor. In the past, I have gone from 4 accounts with balances to 5 but I didn't notice a difference. Maybe there was was but other factors nullified it and I didn't notice. I dunno....

OTOH, the same criteria didn't change my EQ FICO....just TU. Well, regardless, I will make a note of this factor in the future. 

[atarvuzdar]

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ztnjpv wrote:

My FICOs dropped in my recent update because the number of accounts with reported balances went from 5 to 6. Apparently, this lowers your score. Not sure if there is something in particular about 6 accounts but at 5 accounts with balances, this was not an issue. It could be a percentage of open accounts or total accounts. 2 of those accounts are loans as well. In total, I have 8 open accounts on all 3 of my reports (6 card, 2 loan).

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OP, can you please clarify something? You mentioned your accounts reporting balances went from 5 to 6 and that you have 6 CC's and 2 loans. Are you indicating that the accounts reporting balances includes your two loans (meaning 4 out of 6 CC's are reporting balances), or are you saying that all 6 of your CC's are now reporting balances? Either way, it looks like you either hit the threshold of having 1) more than half of your CC's reporting balances, or 2) ALL CC's reporting balances. I would definitely expect either of those scenarios to cause a score drop. Either way, very good information to remind us all about the importance of keeping a majority of CC's reporting at $0 balance!

[ztnjpv]

Atarvuzdar:

I mean that 4 cards and 2 loans accounts are reporting balances. Sorry if that wasn't clear.

[Shogun]

Waiting for mine to update for next month.  I'm now at 0% utilization across the board.  I know I'll take a hit, but not shopping for anything right now so why pay the interest rate.

[ztnjpv]

I don't understand why you're saying that, Shogun.

You can show utlilization and still not pay any interest by simply paying the card after the statement date but before the due date.