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What actually is the "sweet spot"?

Contributor

Re: What actually is the "sweet spot"?

Wow, this thread has been extremely informative. OP, congrats on being the one in your family to care about your credit. It's never easy being the first, but it is immensely beneficial. I can't really contribute to the debate, but keep working hard and you'll figure this credit thing out! Good luck


Starting Scores: EQ [ 525 ] TU [ 567 ] EX [ 565 ] - 02/17
Current Scores: EQ [ 573 ] TU [ 581 ] EX [ 596 ] - 03/17
Message 41 of 58
Valued Contributor

Re: What actually is the "sweet spot"?


Taggerung wrote:

Thank you very much for responding Newhis!

 

Do you have any links and information about the AZEO technique? I Googled it and couldn't find much.

I think the basics are to let one revolving account report a balance of about $10 (or at least 8.9% or less) with the rest of your accounts reporting zero. Also, that balance should be more than $2 or $3. When a balance is that low, some lenders will forgive the amount rather than bill you, meaning that they'll report zero. The account that reports a balance should be a major bank card rather than a retail card. I'll toss in that because Chase reports mid-cycle when you pay down to zero, you shouldn't rely on one of their cards to be the one that reports a balance.

 

As others have said, most of the time you don't have to be that picky. AZEO is something you do when you're about to apply for something important. Steer clear of the bad things, and you should be fine.

 

But if nothing important is coming up, that might be a good time to experiment and see how different (reasonable) balances affect your score. You could try $10 one month and 28.9% another month, for instance. There may be a little "background noise," such as accounts and inquiries aging. But utilization should be the overriding factor.

 

If it were me, I'd wait for card #2 until after your Discover card reports, simply because you'll be positioned to apply for another "good" card rather than bothering with some of the crummy products that are out there.

Message 42 of 58
Member

Re: What actually is the "sweet spot"?

Thank you for the advice South Jamaica!

Haha, I think you're right. I realized you guys have empirical evidence with extraordinary results from your experimentational experience. So I think you’re right in that. Thank you for the advice!

 

May I ask what AAoA  is Sarge?

 

Thank you for the wonderful information and the helpful metaphor CreditGuyInDixie!

Message 43 of 58
Valued Contributor

Re: What actually is the "sweet spot"?

I'm not Sarge, but it's Average Age of Account. Smiley Happy

Message 44 of 58
Community Leader
Senior Contributor

Re: What actually is the "sweet spot"?


Taggerung wrote:

Thank you very much for responding Newhis!

 

So you also recommend going ahead and getting a second card right away?

 

Do you have any links and information about the AZEO technique? I Googled it and couldn't find much.

 

I wondered that about the SSL. I was thinking about just getting a very short term loan like a year and doing it.

 

You said three years ago so you're still newer to credit. Do you have any advice?

Thank you very much for all of the help!


AZEO just means All Zero Except One.  It refers to having All your cards report Zero Except One.  It is a short term strategy for gaining extra points prior to an important credit pull.  It does not help you build your score long term -- not in any way -- though some people still choose to do it every month, which is fine too.  It's just not necessary.

 

If you decide to explore the SSL, then you really need to read and understand the writeup you were given earlier.  If you do that, you'll realize that getting a 12-month loan is far inferior to a 60-month loan.  Either don't do the SSL technique at all -- or do it right.  That's the best way to think about it.

 

Here is the writeup again for your convenience:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

Message 45 of 58
Member

Re: What actually is the "sweet spot"?

Thank you for responding CreditGuyInDixie!

 

I'll have to remember that about the AZEO.

 

So you think even for me with no credit it'd still be better to do it for 60 months? Don't you reap the benefits after the 60 months?
Another thing, is that when I do graduate with my industrial engineering degree I'll buy a new car. So that'd be closer to three years that I actually buy it. That's one of the reasons I was thinking short term too. 

So you think it'd still be better to go long term?

 

So I'd get some benefit to my credit (like the credit mix especially for me), but I wouldn't get near as much unless it's longer term? What if I was able to put more than $500 in short term? Like $750 or $1000?

Message 46 of 58
Valued Contributor

Re: What actually is the "sweet spot"?

CCID is the expert on the loan. But I believe the summarized version is that you take out the loan, pay it down to about $44 right away, then spend 60 months paying off the $44. You'd be getting the benefit of a loan that's almost paid off (i.e. in its sweet spot) for almost five years.

Message 47 of 58
Contributor

Re: What actually is the "sweet spot"?


TygerHawke wrote:

Taggerung wrote:

I just received my first credit card. After seeing my siblings and family struggle and have to deal with bad credit, I deciced I'll be nothing like them.  I'm not much of a spended anyway.

I don't know any credit analysts and have gotten a few answers in person and online, so I deciced to come here.

I've heard that 30% of your credit line is the sweet spot for optimal credit. I've also heard that 25% is. I want the best credit possible as soon as possible. What really is the sweet spot for optimal credit?


Minimum 3 revolving lines and 1 installment line

 

Less than half your revolving lines should report a balance

 

You want to show <9% utilization on the line or lines that do report a balance for total optimization.


Why just half of your revolving lines?  I have balance on all my cards but uti in total is only 5%


Starting Score: EX: 713 EQ: 698
Current Score: TU: 743 EQ: 752 EX: 747
Goal Score: 775





Message 48 of 58
Valued Contributor

Re: What actually is the "sweet spot"?


Taggerung wrote:

Thank you very much for responding Newhis!

 

So you also recommend going ahead and getting a second card right away?

 

Do you have any links and information about the AZEO technique? I Googled it and couldn't find much.

 

I wondered that about the SSL. I was thinking about just getting a very short term loan like a year and doing it.

 

You said three years ago so you're still newer to credit. Do you have any advice?

Thank you very much for all of the help!


My best advice to someone just starting with no file or clean one is: relax.

 

There is a lot of information about credit, after 3 years visiting this site almost everyday I still learn new things, so it could be overwhelming.

 

You need a plan according to what you want. It all depends in age, income, when you will get an auto/mortgage and some other things. There is not a single path to the same goal. 

 

I only have 3 year experience building credit in the USA but 30 years using credit cards on other country. Thanks to the things I learn in this forum I was able to get to 800 in less than 3 years.

 

For someone just starting with first credit card and 18-21 y/o with limited income and no plan for auto/mortgage:

- use the card for 6 months

- get CK account to check TU and EQ reports every week

- get freecreditscore account to get EX report and FICO score every month

- check Amex prequals, you may get a $250 bonus for BCE instead of normal $100 and apply for card

- get Discover IT card

- SP CLI both cards for the next few months

- use your cards normally, no need to AZEO every month. If you do, it will help you from using the cards more than you should.

- always report less than 29%

- PIF by due date. If you start having problems PIF, it is better to cut expenses before you get in trouble

This way you learn how to use 1 card, then more, PIF, avoid debt and keep your credit file clean. It is easier to get to 800 with clean file than 740 with some baddies. Best rates start at 740, some 750 or 760. You can be around 780 in a couple of years.

 

For someone new to the USA, with money, credit card experience in home country and want to build credit as fast as possible:

- get BofA secured card and put $5,000 there (or more, I think the max is $10,000)

- get Discover secured card and put the max (I think $2,500)

- get SSL with Alliant, follow the technique

- wait at least 6 months until you get FICO, get CK and FCS account

- both secured cards will unsecure around the 7th month, they may give you a CLI

- if no auto/mortgage in less than a year, apply for a few good cards

Yes, you can start with some unsecure cards, the good thing about both secured cards is that they will unsecure in less than a year and you can have good SL and don't start with $500 or less limits. Limits are not directly related to score, but they help a lot so your util will be low.

Message 49 of 58
Valued Contributor

Re: What actually is the "sweet spot"?


Isacking97 wrote:
 

Why just half of your revolving lines?  I have balance on all my cards but uti in total is only 5%


After many people experimenting, they found out that for most profiles, if you have less than 50% cards reporting balance, you get the best score.

 

There are people that do tests and let only 1 card report, 50% report or all report and their score doesn't change. This is a general rule but it could be different for a particular profile.

 

Let's say I'm at 780 without micromanage, and if I do I get 15 extra points, will that change an auto loan rate? in most cases no, but if you are at 730 and get 15 extra points it may help you get a lower rate.

 

As CGID, AZEO or less than 50% card reporting, less than 9% balance, etc. is not needed all the time, and for some profile maybe never.

 

Is just a practice that will help you get some extra points and will help you keep your debt in check.

Message 50 of 58