Utilization - per card or overall?

[Thomas_Thumb]

Certainly credit card companies have access to all your charges and payments. They could report monthly statement balances of zero every month but report payments every month which are non zero. That would meet the transactor criteria of: payment current month GE balance posted previous month. The model could differentiate an inactive account by adding a conditional statement: If current month payment = 0 and prior month balance = 0, then Inactive [better yet condition should be prior month Less Than or Equal To 0 to safeguard against gaming the system with inactive accounts].

See below

[Anonymous]

Hi Norman!  Just for clarity, let's take two guys, Bob and Fred. 

Bob has two credit cards.  He doesn't use them for three years in a row.  He makes no charges of any kind.  He also therefore makes no payments of any kind.

Fred has six and uses them fairly often (though occasionally any given card might not be used for a couple months).  He allows a positive balance to report, and then pays the amount in full shortly after the statement posts.

If what you are saying is right, it would mean that every Transactor-Revolver model that is being developed (whether by TU, FICO, whoever) will classify Bob as just as much of transactor as Fred.  The reason is that Bob's monthly payment ($0) is always greater than or equal to the previous month's reported balance ($0).  Therefore Bob is a Full Transactor.

If so, that's great to hear.  It surprises me a little, since a person who makes no transactions of any kind for three years is being considered (by all models that will be developed) a transactor just as much as a person who has demonstrated a rich history of card use coupled with regularly paying it off.

I have personally been treating these new and future models as a bit of a mystery.  That's why I have erred on the side of assuming that it may be easiest to actually create a history of reported balances and subsequent payment if you want to reap the full benefit of the new T-R distinction.  But I am happy to learn (if true) that this may not be necesssary.

[Aahz]

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@Anonymous wrote:

If what you are saying is right, it would mean that every Transactor-Revolver model that is being developed (whether by TU, FICO, whoever) will classify Bob as just as much of transactor as Fred.  The reason is that Bob's monthly payment ($0) is always greater than or equal to the previous month's reported balance ($0).  Therefore Bob is a Full Transactor.

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Close, but not quite.

Fred is a Transactor regardless of being a PIF or PTZ practitioner.

Bob is neither a Transactor nor a Revolver.  He's Inactive.  The queries would look more like-

"IF Monthly Payment =0 AND Balance =0 THEN Inactive"

"IF Monthly Payment < Minimum THEN Default"

"IF Monthly Payment < Balance THEN Revolver"

"IF Monthly Payment >= Balance AND Monthly Payment >0 Then Transactor"

with the possible additions of-

"IF Monthly Payment > Minimum AND < (5% Balance) THEN Minimum Payer" (aka Revolver)

"IF Monthly Payment > Minimum AND > (5% Balance) THEN Steady Payer" (aka Revolver+)

[Thomas_Thumb]

You are allowing the system to be gamed!!!

Your 1st condition should read:

"IF Monthly Payment =0 AND Balance <=0 THEN Inactive"

Your 3rd condition should read

"IF Monthly Payment > Minimum AND < Balance THEN Revolver"

[Aahz]

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@Anonymous wrote:

It's important to bear in mind that nobody claims that you get any long term benefit out of keeping most cards reporting a balance of $0.  That's a pure ephemeral snapshot aspect of scoring.  So there's really no need to keep all or most of your cards at $0.  Every tiny bit of advantage you get from that you can obtain from zeroing them out in the month before an important credit pull.

Here (as I see it) are the advantages to paying in full AFTER the statement cut:

(1)  It is really easy.  You can just set your cards up on auto pay.  Boom.  You're done.  PTZ (pay to zero) takes more work, and you have to make sure you don't use your card between the time you pay and the beginning of the next cycle.

(2)  We know that PIF (after statement) is in full keeping with what the T-R distinction models are looking for.  We know it will give you the full benefit of being a Transactor. This is more than we can say about PTZ.  Maybe PTZ will give you the full benefit of being a transactor -- maybe not.  Until we do know it just seems simpler to continue establishing your T history via the PIF route.

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Working backwards up your post....

You're looking at this purely from a PIFer standpoint.  As a PTZer you almost had me convinced to change to PIF.  However, I have yet to see any evidence of your statement number 2.  In none of the linked articles has anything been stated about letting balances report, only about paying off balances (with no mention of reporting or statement cuts).

Regarding statement 1 - YOU may find it's "really easy" to just use autopay, but as someone who suffered through years of my reports showing late payments that were a result of the banks screing up autopay I personally, no longer trust it.  I pay all my bills "manually", so PTZ is no more difficult then PIF.

Finally (firstly since I'm working backwards?), while we all know FICO scores are a mere snapshot in time, not all of us always have the luxury of waiting 5 weeks (full statement period plus time to report) for a better score.  I want my scores optimized at all times just in case I need them. Great credit card offers frequently pop-up with no notice at all and one month (or shorter) deadlines.  The only car loan I have ever needed was the result of my car imploding and my needing a replacement in days.  I eeked into the lowest APR by a mere 2 points.  Had I been a PIFer instead of a PTZer that loan would have cost me more.  

[Anonymous]

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@Aahz wrote:

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@Anonymous wrote:

If what you are saying is right, it would mean that every Transactor-Revolver model that is being developed (whether by TU, FICO, whoever) will classify Bob as just as much of transactor as Fred.  The reason is that Bob's monthly payment ($0) is always greater than or equal to the previous month's reported balance ($0).  Therefore Bob is a Full Transactor.

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Close, but not quite.

Fred is a Transactor regardless of being a PIF or PTZ practitioner.

Bob is neither a Transactor nor a Revolver.  He's Inactive.  The queries would look more like-

"IF Monthly Payment =0 AND Balance =0 THEN Inactive"

"IF Monthly Payment < Minimum THEN Default"

"IF Monthly Payment < Balance THEN Revolver"

"IF Monthly Payment >= Balance AND Monthly Payment >0 Then Transactor"

with the possible additions of-

"IF Monthly Payment > Minimum AND < (5% Balance) THEN Minimum Payer" (aka Revolver)

"IF Monthly Payment > Minimum AND > (5% Balance) THEN Steady Payer" (aka Revolver+)

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Exactly. In order to be a Transactor there must be positive payments. "$0" is not positive payments. Its not rocket science guys - this is pretty basic programming/boolean logic. If you're paying off all of your charges each and every month, regardless of whether a statement balance shows or not, you are a Transactor - and its not difficult to discern as long as payment data is reported.

[Aahz]

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@Thomas_Thumb wrote:

You are allowing the system to be gamed!!!

Your 1st condition should read:

"IF Monthly Payment =0 AND Balance <=0 THEN Inactive"

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I'm sure you're correct, Thomas!  As I said upthread this is not really my area.

However, do credit reports ever show a less than zero balance?  I have a CU rewards card that automatically issues rewards while cutting the statement.  Since I PTZ my statement balance is always <0 but reports as 0.  I've had several other cards close with negative statement balances as well due to refunds, but never seen a negative balance on a report.

[Thomas_Thumb]

Good point - but who knows, better safe than sorry.

[Anonymous]

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@Anonymous wrote:

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Exactly. In order to be a Transactor there must be positive payments. "$0" is not positive payments. Its not rocket science guys - this is pretty basic programming/boolean logic. If you're paying off all of your charges each and every month, regardless of whether a statement balance shows or not, you are a Transactor - and its not difficult to discern as long as payment data is reported.

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Hi Norman.  That's fine.   But that's a new condition that you are adding.  Your initial language was this:

The method of detecting Transactor behavior is to compare the difference between payments reported and previous months statement balance (Payments - Balance). If the value of payments minus previous balance is zero or any positive number then you are a "full transactor"

The example I gave of Bob was a guy who's value of payments - previous balance was zero.  $0 - $0.

The fair thing to have said on your end might have been "Good catch.  I should have added that the payments must have been positive."  That way we get to help each other think through this stuff together.

I am very open to the possibility -- indeed likelihood -- that the future T-R models might work as you and TT described.  I'm still less certain than you are, but I am much more convinced that you guys would be right than I would have been a few days ago say.

[Anonymous]

Hello Aahz.  Very thoughtful!  My comments in blue below.

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@Aahz wrote:

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@Anonymous wrote:

It's important to bear in mind that nobody claims that you get any long term benefit out of keeping most cards reporting a balance of $0.  That's a pure ephemeral snapshot aspect of scoring.  So there's really no need to keep all or most of your cards at $0.  Every tiny bit of advantage you get from that you can obtain from zeroing them out in the month before an important credit pull.

Here (as I see it) are the advantages to paying in full AFTER the statement cut:

(1)  It is really easy.  You can just set your cards up on auto pay.  Boom.  You're done.  PTZ (pay to zero) takes more work, and you have to make sure you don't use your card between the time you pay and the beginning of the next cycle.

(2)  We know that PIF (after statement) is in full keeping with what the T-R distinction models are looking for.  We know it will give you the full benefit of being a Transactor. This is more than we can say about PTZ.  Maybe PTZ will give you the full benefit of being a transactor -- maybe not.  Until we do know it just seems simpler to continue establishing your T history via the PIF route.

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Working backwards up your post....

You're looking at this purely from a PIFer standpoint.  As a PTZer you almost had me convinced to change to PIF.  However, I have yet to see any evidence of your statement number 2.  In none of the linked articles has anything been stated about letting balances report, only about paying off balances (with no mention of reporting or statement cuts).

You may be misreading what I said in statement 2.  I don't say there that PTZ is certain not to work.  I say that PIF will work and that it was unclear to me to PTZ would as well.  I am more convinced today that it would work than I was yesterday.  I liked TT's simple little spreadsheet with the circling.  So it's not a question of me producing evidence that proves that PTZ will not work in some model.  I was just saying that I felt sure about PIF but it was more than I felt could be said for sure to say that PTZ would as well.

Regarding statement 1 - YOU may find it's "really easy" to just use autopay, but as someone who suffered through years of my reports showing late payments that were a result of the banks screing up autopay I personally, no longer trust it.  I pay all my bills "manually", so PTZ is no more difficult then PIF.

Interesting.  I have never heard of that but I believe it must have been real in your case.  So sorry to hear that!  But I have no problem with people manually paying either, of course.  With PTZ, you do have a window of time between when you pay the card to $0 and when you can use it again (beginning of next cycle) and that for many of us is aggravating to micromanage.

Finally (firstly since I'm working backwards?), while we all know FICO scores are a mere snapshot in time, not all of us always have the luxury of waiting 5 weeks (full statement period plus time to report) for a better score.  I want my scores optimized at all times just in case I need them. Great credit card offers frequently pop-up with no notice at all and one month (or shorter) deadlines.  The only car loan I have ever needed was the result of my car imploding and my needing a replacement in days.  I eeked into the lowest APR by a mere 2 points.  Had I been a PIFer instead of a PTZer that loan would have cost me more.  

The sentence I highlighted in red seems like the decisive issue for you, which is fine.  You have a strong non-negotiable need to have your FICO scores optimized at all times, every day in fact.  That's the bottom line, so for sure, PTZ is the right thing for you.  Post statement PIF (at least in its laid back, just let your cards report man and take a hit on the bong way) isn't a real time score optimizer, since it results in more than one card showing a balance, often results in total utilization above 5%, and might even (rarely) result in an individual card at high utilization.  My Citi DC may be reporting at a really high level this month, for example.

Final note:

The real thing I am "evangelical" about here -- smile -- is not trying to convince people that no one should ever PTZ.  Rather, it's spreading an awareness that revolving vs. transacting is likely going to be an important dimension of scoring in the coming year or two.  You very well may be right that PTZ will be just fine, since what it certainly is is not revolving.  And btw, since you seem to really watch your accounts like a hawk, you could if you felt like it be a pure PTZ-er but still rotate the exactly one card that reports a balance.  Don't have to, but you could if you wanted.  Best wishes!

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