A new format for myFICO reports is now appearing (for both new orders and reports on file for the last 30 days).
One interesting aspect is that the former format's discussion of credit utilization ratios gave the impression that both overall utilization (total revolv bal / total revolv CL) AND utilization on individual accounts (with util over 50% typically cited by others as an adverse indicator) weighed into the FICO Score calc.
Under the new report, there are at least two indications that usage on individual accounts is not a significant scoring factor and that it's overall utilization that drives this component of the FICO Score.
Is this new impression accurate? Let's say I have 3 accounts each with $10K limits and each with $3K outstanding balance. (30% overall util; 30% on each indiv a/c) If I had a very low rate on one of the accounts and an opportunity to consolidate the accounts at low cost, would aggregating the $9K outstanding onto one of the $10K accounts (leaving the other two accounts open) have no significant impact on my score??
This is a key question because at present, given an impression that it benefits your FICO scoring to an extent to maintain bal:CL ratios of under 50%, I've tended to distributed my balances over several accounts. However, just from the sake of account management, I'd prefer to hold balances in few accounts -- taking some accounts to as high as 90% utilization.
Any insight is appreciated. I will note that when I consolidated account balances in this fashion about 3 years ago, I saw a significant decline in my score that reversed when I split the balances afterwards. (There were no other material changes in my debts/accounts other than this.)
Many thanks.
- Harry
One interesting aspect is that the former format's discussion of credit utilization ratios gave the impression that both overall utilization (total revolv bal / total revolv CL) AND utilization on individual accounts (with util over 50% typically cited by others as an adverse indicator) weighed into the FICO Score calc.
Under the new report, there are at least two indications that usage on individual accounts is not a significant scoring factor and that it's overall utilization that drives this component of the FICO Score.
Is this new impression accurate? Let's say I have 3 accounts each with $10K limits and each with $3K outstanding balance. (30% overall util; 30% on each indiv a/c) If I had a very low rate on one of the accounts and an opportunity to consolidate the accounts at low cost, would aggregating the $9K outstanding onto one of the $10K accounts (leaving the other two accounts open) have no significant impact on my score??
This is a key question because at present, given an impression that it benefits your FICO scoring to an extent to maintain bal:CL ratios of under 50%, I've tended to distributed my balances over several accounts. However, just from the sake of account management, I'd prefer to hold balances in few accounts -- taking some accounts to as high as 90% utilization.
Any insight is appreciated. I will note that when I consolidated account balances in this fashion about 3 years ago, I saw a significant decline in my score that reversed when I split the balances afterwards. (There were no other material changes in my debts/accounts other than this.)
Many thanks.
- Harry
FICO Standard product. I believe the new report format was implemented for the first time today. If you've pulled your report within the last 30 days, reviewing the report on file will bring up the new format.
Well, I'm disappointed not to receive an answer of some type re utilization factoring in FICO. I understand that it's undesirable to be too specific about what's evaluated. However, where general guidelines are provided it's only reasonable that they should be clear.
In the past FICO has done a good job of helping people understand what impacts their FICO score and what isn't relevant. That helps make the product something people have reasonable faith in as accurately reflecting their credit profile.
What I want to grasp is whether the current representation of utilization is accurate -- that, basically, having a card at 90% utilization won't hurt you when your overall utilization is at 10 percent. This is at odds of prior representation that suggested having a card near-maxed out would hurt you.
- Harry
In the past FICO has done a good job of helping people understand what impacts their FICO score and what isn't relevant. That helps make the product something people have reasonable faith in as accurately reflecting their credit profile.
What I want to grasp is whether the current representation of utilization is accurate -- that, basically, having a card at 90% utilization won't hurt you when your overall utilization is at 10 percent. This is at odds of prior representation that suggested having a card near-maxed out would hurt you.
- Harry
Tuscani wrote:
Tuscani, that's what has generally been discussed in the past concerning utilization. However, as I stated, FICO is providing different guidance on this in the new scoring report format that has just been released. It specifically indicates that only aggregate utilization is factored; utilization within individual accounts isn't:
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"Your FICO score evaluates your total revolving credit balances in relation to your total credit limits on those accounts. In your case, this ratio of balances to credit limits is too high."
"Keep this in mind: This credit usage ratio is one of the most important factors to your FICO score, so you should work on paying down your balances. Your FICO score looks at the ratio of revolving debt, but not in which accounts the debt resides. Therefore, consolidating or moving your debt from one account to another will usually not help your FICO score since the same total amount is owed."
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This runs contrary to past indications. It also runs contrary to one experience I had where I consolidated three accounts with moderate balances into a single account and immediately saw a sharp hit to my FICO score.
This new statement bears clarification. I think the only reliable source will be from FICO themselves for anything you, I or any other layman might put out is sheer speculation.
- Harry
Scoring takes into account individual card and overall utilization. So yes, having one card at 90% will still cost you points even though your overall util might be low.
Tuscani, that's what has generally been discussed in the past concerning utilization. However, as I stated, FICO is providing different guidance on this in the new scoring report format that has just been released. It specifically indicates that only aggregate utilization is factored; utilization within individual accounts isn't:
==================
"Your FICO score evaluates your total revolving credit balances in relation to your total credit limits on those accounts. In your case, this ratio of balances to credit limits is too high."
"Keep this in mind: This credit usage ratio is one of the most important factors to your FICO score, so you should work on paying down your balances. Your FICO score looks at the ratio of revolving debt, but not in which accounts the debt resides. Therefore, consolidating or moving your debt from one account to another will usually not help your FICO score since the same total amount is owed."
==================
This runs contrary to past indications. It also runs contrary to one experience I had where I consolidated three accounts with moderate balances into a single account and immediately saw a sharp hit to my FICO score.
This new statement bears clarification. I think the only reliable source will be from FICO themselves for anything you, I or any other layman might put out is sheer speculation.
- Harry
@Anonymous wrote:It doesn't matter whether people (individuals like us) have faith in the product. We're not the customers even though we have to pay to buy it. The lenders are the real customers and FICO aims to please them, not us.
@hdporter wrote:
In the past FICO has done a good job of helping people understand what impacts their FICO score and what isn't relevant. That helps make the product something people have reasonable faith in as accurately reflecting their credit profile.
I'll suggest that at the point that a consumer purchases a scoring report they become the "customer". And it behooves FICO to ensure that the consumer understands what they're looking at. In general FICO has done a very strong job of this.
However, because of the discrepancy between what has generally been understood to be components of the utilization scoring factor and what is now being put out, some clarification is warranted.
- Harry