Put to the test: FICO and past util

[money_talks]

I would like to put this to the test with the following and hopefully someone can chime in on this!

Hypothethical example: (assuming lenders report balance to CRA at the end of every day and nothing changes in your credit report, only revolving credit below)

Snapshot at Day 1

Util=100%

Score=600

Snapshot at Day 2

Util=75%

Score=610

Snapshot at Day 3

Util=50%

Score=620

Snapshot at Day 4

Util=25%

Score=630

Snapshot at Day 5

Util=1%

Score=640

Snapshot at Day 6

Util=100%

Score=625

As you can see above, on Day 6, it is more likely that your score would drop to 625 instead of what you had on Day 1 of 600. It is more plausible that you accumulate points with every low util reported and it builds off of those points. And I think we have eliminated the rebuttal of "on time payments playing a part of this" as I don't think FICO scores you on how often you make payments during a certain time window. AAoA wouldn't be affected much as it is only 6 days. Again, all this is a simple example and obviously the FICO model is more mathematical.

Because if the above example does not hold any weight for any reason, then it seems like it would look like this if FICO doesn't take into account (somehow) your past util.

Snapshot at Day 1

Util=1%

Score=600

Snapshot at Day 2

Util=1%

Score=600

Snapshot at Day 3

Util=1%

Score=600

Snapshot at Day 4

Util=1%

Score=600

Essentially then, your score would stay the same until another factor as evaluated by FICO gets updated (eg, passing of time and longer AAoA). If nothing else changes in your credit report, then the model is saying you are missing out on 30% of being able to increase your score due to reaching the max point scoring util.

[guiness56]

FICO doesn't score you or give you credit for ontime payments as that is expected of you.

FICO does not take into account past utilization.  There is no memory of past utilization at all.  You are only scored for what is on the report at the time a score is pulled.

Going from 1% utilization to 100% your score would definitely suffer more than 15 points.  And vice versa.  Going from 100% to 1 % you would see a big jump in score.

With all that said, if nothing else changes on your credit profile and your utilization stays a constant 1%, your score won't change either,

[pizzadude]

You would also need to look at individual card(s) utilization, as well as the number of revolving accounts with balances, these will also factor into your revolving utilization and your FICO score.

[money_talks]

pizzadude: I understand those factors play a part, so we can say that there is only one revolving account on the credit report with the util changing as described above in a matter of days.

guiness: Based on your response, is this the way the FICO model works? Again, this is assuming nothing else changes in your credit report only the util below. Basically, at Day 6 you would return to your Day 1 score. Is that correct?

Snapshot at Day 1

Util=100%

Score=600

Snapshot at Day 2

Util=75%

Score=610

Snapshot at Day 3

Util=50%

Score=620

Snapshot at Day 4

Util=25%

Score=630

Snapshot at Day 5

Util=1%

Score=640

Snapshot at Day 6

Util=100%

Score=600

[guiness56]

If nothing else has changed except utilization, yes, it should return to what it was.

[money_talks]

Wow! That seems unfair for a variety of reasons.

Here is one:

Let's say a person has one revolving account and for the past 5 years has reported a Util 1%. Then one month, that person simply forgets to pay off his CC that month and util gets reported at 100%. So if the next day this person applies for a loan, and the lender only looks at the credit score and does not go into the detailed CR to see that the person has kept 1% util for the past 5 years, that person might get a really bad APR or maybe even not get approved at all. Is this correct? This would work the other way around right? ie, someone has 100% util every month for 5 years, then pays it off one month to 1%, etc..

[guiness56]

From my personal experience, I have never had a lender that did not look at my CR when I applied for something.

However, the detailed report is not going to show what your balance was 2 months ago much less 5 years ago.  It only shows the reported balance for the time it was pulled.

If you know you are going to have a high utilization I wouldn't apply until it was down.

[DaveSignal]

---

@money_talks wrote:

Wow! That seems unfair for a variety of reasons.

Here is one:

Let's say a person has one revolving account and for the past 5 years has reported a Util 1%. Then one month, that person simply forgets to pay off his CC that month and util gets reported at 100%. So if the next day this person applies for a loan, and the lender only looks at the credit score and does not go into the detailed CR to see that the person has kept 1% util for the past 5 years, that person might get a really bad APR or maybe even not get approved at all. Is this correct? This would work the other way around right? ie, someone has 100% util every month for 5 years, then pays it off one month to 1%, etc..

---

The example is correct.  A person could have high util for 5 years and then pay it all down in one month and the FICO score would skyrocket.  This is the easiest way to quickly improve your credit score, if you have the money.

[money_talks]

guiness wrote: However, the detailed report is not going to show what your balance was 2 months ago much less 5 years ago.  It only shows the reported balance for the time it was pulled.

guiness, I meant the full CR as lenders get them from the CRAs, which apparently is more detailed than those available to the consumer. Based on the response below, it shows up 2 years of balance history and CLs.

"Balance history shows on a full CR for two years." Posted by cheddar in

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Does-FICO-care-about-past-util/td-p/16506... 

[DaveSignal]

some accounts show balance and payment history. For the ones that do this, it usually shows the last month's balance and the previous months payment on a line.  it is not always accurate, especially for lenders that send off-cycle updates or for account holders who make multiple payments in a month.   Nevertheless, some lenders might use this data on a manual review.