topic Re: Utilization vs. AAoA in Understanding FICO® Scoring

Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 06:00:58 GMT

Hey forum geniuses, I'd love some advice on my situation.

I'm an authorized user on my mom's Macy's account. That wasn't done for credit purposes -- she just added me back in the day when I borrowed her card a time or two (and before I knew that being an AU was a thing). But, it actually really helped me during the period when my baddies were falling away and I was apping for new credit. Now, however, I'm not sure if having Macy's report to my credit is still a worthwhile thing or if I should have her remove me.

Here are the details:

-- I have a grand total of 4 open accounts on my credit report, all of which are new credit cards. The oldest card is 10 months and the other 3 were all opened in March of this year. So, my AAofA is in the toilet and will be for a loooong time.

-- My current reported utilization is 9%, which includes Macy's. Without Macy's it would be 5% and dropping (I'm working on paying down the one card that isn't PIF at the end of each month).

-- Because this Macy's account is almost 16 years old, with Macy's reporting my AAoA is 6 years, 6 months. Without it it's like 6 months (LOL).

-- My mom keeps a high balance, about 30%. This month it will be 23% but it could easily top 50% if she's been shopping and not making large payments.

So, I'm trying to figure out which is helping/will help my score more -- the decreased utilization (and the peace of mind gained from being able to control that utilization) without Macy's or the fact that Macy's alone is giving me a far better AAoA than I would have on my own.

To semi quote The Clash, should Macy's stay or should it go now?

ETA: This month I got a couple of CLI's totalling 6K that has not yet been reported to my credit. So obviously that will lower my current 9%/5% situation.

Re: Utilization vs. AAoA

rmduhon — Thu, 13 Jul 2017 08:05:37 GMT

Utilization is 30% of your score, length of history is 15%.

Re: Utilization vs. AAoA

SouthJamaica — Thu, 13 Jul 2017 10:52:01 GMT

@WhiteCleats wrote:
Hey forum geniuses, I'd love some advice on my situation.

I'm an authorized user on my mom's Macy's account. That wasn't done for credit purposes -- she just added me back in the day when I borrowed her card a time or two (and before I knew that being an AU was a thing). But, it actually really helped me during the period when my baddies were falling away and I was apping for new credit. Now, however, I'm not sure if having Macy's report to my credit is still a worthwhile thing or if I should have her remove me.

Here are the details:

-- I have a grand total of 4 open accounts on my credit report, all of which are new credit cards. The oldest card is 10 months and the other 3 were all opened in March of this year. So, my AAofA is in the toilet and will be for a loooong time.

-- My current reported utilization is 9%, which includes Macy's. Without Macy's it would be 5% and dropping (I'm working on paying down the one card that isn't PIF at the end of each month).

-- Because this Macy's account is almost 16 years old, with Macy's reporting my AAoA is 6 years, 6 months. Without it it's like 6 months (LOL).

-- My mom keeps a high balance, about 30%. This month it will be 23% but it could easily top 50% if she's been shopping and not making large payments.

So, I'm trying to figure out which is helping/will help my score more -- the decreased utilization (and the peace of mind gained from being able to control that utilization) without Macy's or the fact that Macy's alone is giving me a far better AAoA than I would have on my own.

To semi quote The Clash, should Macy's stay or should it go now?

ETA: This month I got a couple of CLI's totalling 6K that has not yet been reported to my credit. So obviously that will lower my current 9%/5% situation.

I think you're better off ceasing your relationship with the Macy's card. You might lose a few points but I don't think it will be drastic.

Re: Utilization vs. AAoA

NRB525 — Thu, 13 Jul 2017 11:43:34 GMT

OP do you still have any baddies reporting on your account?

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 11:56:37 GMT

I think you could argue this one either way.

If you are planning on applying for any other products, having a 6+ year AAoA is going to help more than one that is 6 months. The difference between 5% aggregate utilization and 9% aggregate utilization isn't significant. If you have no intentions of applying for anything for a year or year and a half, your AAoA will be 2 years by that time which is more than solid enough assuming the rest of your profile is sound when seeking out new credit.

Another thing I'd recommend here is perhaps giving your Mom a little credit/utilization 101 talk. Maybe she doesn't realize that letting that Macy's card hang out at 50% or more on occasion isn't the greatest idea. Only you know how she'd take to such a talk, but if she were to start rolling with far less utilization on that card you wouldn't have to worry about it really.

Re: Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 12:15:58 GMT

@NRB525 wrote:
OP do you still have any baddies reporting on your account?

Yes. I have 13 near-consecutive late payments on a car loan. Those will begin falling off in October of this year.

Re: Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 12:31:06 GMT

@Anonymous wrote:
I think you could argue this one either way.

If you are planning on applying for any other products, having a 6+ year AAoA is going to help more than one that is 6 months. The difference between 5% aggregate utilization and 9% aggregate utilization isn't significant. If you have no intentions of applying for anything for a year or year and a half, your AAoA will be 2 years by that time which is more than solid enough assuming the rest of your profile is sound when seeking out new credit.

My car is getting old and a new one is on the horizon. Assuming it doesn't start requiring costly repairs that force my hand, the plan is to wait to get a new one until all the late payments from the previous auto loan have fallen off. That will be in January 2019. But yeah, no hard pulls planned for two years from March to give my credit time to "heal" from all the apping/inquiries.

2 years is considered "solid enough"? Because my target goal is a 0% or 1.9% interest rate on a new car. Though I'm not sure how realistic that is.

Another thing I'd recommend here is perhaps giving your Mom a little credit/utilization 101 talk. Maybe she doesn't realize that letting that Macy's card hang out at 50% or more on occasion isn't the greatest idea. Only you know how she'd take to such a talk, but if she were to start rolling with far less utilization on that card you wouldn't have to worry about it really.

*Snort* Yeah, I actually broached that subject a time or two and the upshot is that she's 73 with a very deep credit file so she gives no **bleep**s that her utilization is high here and there. Moms. What can you do?

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 15:08:10 GMT

The only drawback to keeping it is utilizaion, right? Most months it won't matter because you won't be applying for credit. (Key principle: your credit score only matters if you need to use it for something.)

If you do need to apply for credit, which sounds like will be a rare event in the next 24 months, you will be able to solve the utilization problem by paying all your cards to zero except one -- the remaining card you will have report at $10 say.

I wouldn't write off the "talk with my mom" idea. Sure, you can see that getting her to change her credit habits completely and to do so every month will not work. Point taken. But if you were to find out when that card typically reports to FICO (easy to do, it's on your report) you could do the following:

* When applying for credit, ask your mom if just this one time she'd be willing to pay down her credit card about a week before the statement prints.

Re: Utilization vs. AAoA

SouthJamaica — Thu, 13 Jul 2017 17:09:25 GMT

@Anonymous wrote:
The only drawback to keeping it is utilizaion, right? Most months it won't matter because you won't be applying for credit. (Key principle: your credit score only matters if you need to use it for something.)

If you do need to apply for credit, which sounds like will be a rare event in the next 24 months, you will be able to solve the utilization problem by paying all your cards to zero except one -- the remaining card you will have report at $10 say.

I wouldn't write off the "talk with my mom" idea. Sure, you can see that getting her to change her credit habits completely and to do so every month will not work. Point taken. But if you were to find out when that card typically reports to FICO (easy to do, it's on your report) you could do the following:

* When applying for credit, ask your mom if just this one time she'd be willing to pay down her credit card about a week before the statement prints.

CGID I just want to express my dissent from the commonly held view that one needs only worry about one's credit score when "applying for credit".

I find that credit searches come up repeatedly in life, when one is not really 'applying for credit'..... e.g.

-auto insurance premiums

-cosigning a lease

-changing cell phones

-moving

-opening a savings account with a credit union

etc

When these things come up, one often doesn't have the time [minimum of a month] needed to optimize one's credit profile.

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 17:43:33 GMT

That's a sound point, SouthJ. I think the right thing for people to do is to evaluate your own list of enumerated examples and think about whether they apply to them. For some people they might, for others not so much. In my case those basically don't apply to me -- but you are right that they might apply to others, so thanks.

In the very specific case of our OP, he can keep keep his FICO score close to optimal every month by keeping almost all his cards at $0 with one card reporting $10. From what he has said thus far, it sounds like this would keep his util < 6% most months, and even when his mom went up to 50% he might still be < 8.99%.

PS. I think you'd agree that worrying about optimizing your score is only important when you need it for something. You are making the point that the situations where you need it may be more common then just applying for a new card or loan, which is sound. But the key misunderstanding that people need to avoid is thinking that keeping their util down will help them as a long term strategy for building their score. It doesn't help with that, as you know, and that was my point to the OP. Basically he wants to stay in the garden and gradually build his score for two years -- so a hyper focus on utilization may be misplaced.

My feeling is he should keep the AU, leverage it for any new applications for credit in the next three years, but with the plans to drop it eventually.

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 17:44:38 GMT

@WhiteCleats wrote:

2 years is considered "solid enough"? Because my target goal is a 0% or 1.9% interest rate on a new car. Though I'm not sure how realistic that is.

What I mean by "solid enough" is that once you obtain a 2 year AAoA or greater, IMO, that will no longer hold you back in that I'm not sure I've ever heard of a denial based on lack of credit history or age of accounts too low once that milestone is hit. Of course there are probably exceptions out there, but 2 years AAoA should be sufficient in 99% of cases.

CGID and SJ, I see both of your points above and understand both arguments. I think there should be an asterisk to each argument, though and that IMO would be the credit scores that the person in question possesses. If you're talking someone with scores that are all 700+ (certainly 740+) I think CGIDs argument is very valid. There really is no need to optimize anything at that point, as you're going to be viewed by anyone as having an excellent profile regardless. Where I think SJs argument holds water is if you're talking those with "on the cusp" scores or worse. Basically anything 600's, but definitely anything sub-650 or so. These type of profiles would certainly benefit the most from things like the SSL technique, AZEO, etc. as they could mean 40-50 points more (or less) with their scores. When you have an "on the cusp" type score, 40-50 points can certainly make or break you when someone decides to take a look at your scores/profile.

Re: Utilization vs. AAoA

SouthJamaica — Thu, 13 Jul 2017 17:57:19 GMT

@Anonymous wrote:
@WhiteCleats wrote:

2 years is considered "solid enough"? Because my target goal is a 0% or 1.9% interest rate on a new car. Though I'm not sure how realistic that is.

What I mean by "solid enough" is that once you obtain a 2 year AAoA or greater, IMO, that will no longer hold you back in that I'm not sure I've ever heard of a denial based on lack of credit history or age of accounts too low once that milestone is hit. Of course there are probably exceptions out there, but 2 years AAoA should be sufficient in 99% of cases.

CGID and SJ, I see both of your points above and understand both arguments. I think there should be an asterisk to each argument, though and that IMO would be the credit scores that the person in question possesses. If you're talking someone with scores that are all 700+ (certainly 740+) I think CGIDs argument is very valid. There really is no need to optimize anything at that point, as you're going to be viewed by anyone as having an excellent profile regardless. Where I think SJs argument holds water is if you're talking those with "on the cusp" scores or worse. Basically anything 600's, but definitely anything sub-650 or so. These type of profiles would certainly benefit the most from things like the SSL technique, AZEO, etc. as they could mean 40-50 points more (or less) with their scores. When you have an "on the cusp" type score, 40-50 points can certainly make or break you when someone decides to take a look at your scores/profile.

One never actually knows what score will be used. I only recently learned about FICO's 'telecommunications' score, of which I had never heard -- not even on this forum -- which is apparently used by cell phone companies and the like.

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 18:00:25 GMT

Well if you start worrying about what model may be used, you'll drive yourself mad, as there are factors on some models that may maximize your score where on other models they don't do a thing.

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 18:44:02 GMT

@SouthJamaica wrote:
One never actually knows what score will be used. I only recently learned about FICO's 'telecommunications' score, of which I had never heard -- not even on this forum -- which is apparently used by cell phone companies and the like.

Are you certain that this score is made by FICO (and that it is a model different from the major models we are familar with, e.g. FICO 8 Classic etc.)?

Also do you happen to know what CRA database is used for the score? Is it NCTUE?

Here is a telecom scoring model made by Equifax, called the Exchange Risk Score:

http://www.equifax.com/pdfs/corp/EFS_1025_Exchange_risk_score_0539-10.pdf

It draws its data from NCTUE apparently.

Re: Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 21:31:54 GMT

@Anonymous wrote:
The only drawback to keeping it is utilizaion, right?

Right. On-time payments aren't a worry with her.

If you do need to apply for credit, which sounds like will be a rare event in the next 24 months, you will be able to solve the utilization problem by paying all your cards to zero except one -- the remaining card you will have report at $10 say.

Yeah, I caught that leave-something-on-one-card tip on other threads -- which is a fantastic piece of advice. I had no idea.

I wouldn't write off the "talk with my mom" idea. Sure, you can see that getting her to change her credit habits completely and to do so every month will not work. Point taken.

I have spoken to her. But, her attitude is that it's her card and though she understands my issue it's not really her problem. Which in truth, it isn't.

But if you were to find out when that card typically reports to FICO (easy to do, it's on your report) you could do the following:

* When applying for credit, ask your mom if just this one time she'd be willing to pay down her credit card about a week before the statement prints.

I'm with you on that -- it reports on the 13th and I watch it like a hawk. But that's a great idea to ask her to pay the balance (assuming she can) when I'm about to apply for credit. That could potentially solve my utilization problem when it most matters.

Re: Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 21:39:29 GMT

@SouthJamaica wrote:
CGID I just want to express my dissent from the commonly held view that one needs only worry about one's credit score when "applying for credit".

I find that credit searches come up repeatedly in life, when one is not really 'applying for credit'..... e.g.

-auto insurance premiums

-cosigning a lease

-changing cell phones

-moving

-opening a savings account with a credit union

etc

When these things come up, one often doesn't have the time [minimum of a month] needed to optimize one's credit profile.

But are those things sensitive to utilization? Because mathematically, even if she maxed out her card (which she wouldn't), she couldn't push my utilization past 19%.

Re: Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 21:46:02 GMT

@Anonymous wrote:
...But the key misunderstanding that people need to avoid is thinking that keeping their util down will help them as a long term strategy for building their score. It doesn't help with that, as you know, and that was my point to the OP. Basically he wants to stay in the garden and gradually build his score for two years -- so a hyper focus on utilization may be misplaced.

My feeling is he should keep the AU, leverage it for any new applications for credit in the next three years, but with the plans to drop it eventually.

I think you're right about my focus being misplaced. I'd been reading that trended data is something that's looming for both FICO and Vantage and I was concerned that when the algorithm changed I'd be caught in a less than favorable place.

I'm starting to think that's the best course. Keep it until my gardening is over, app for whatever new credit (more cards, a car), and then dump it when I'm back in the garden.

Re: Utilization vs. AAoA

Asilomar — Thu, 13 Jul 2017 21:56:34 GMT

@Anonymous wrote:
What I mean by "solid enough" is that once you obtain a 2 year AAoA or greater, IMO, that will no longer hold you back in that I'm not sure I've ever heard of a denial based on lack of credit history or age of accounts too low once that milestone is hit. Of course there are probably exceptions out there, but 2 years AAoA should be sufficient in 99% of cases.

Sufficent to qualify for a 0% or 1.9% interest rate on a car? Excluding all other factors, of course.

CGID and SJ, I see both of your points above and understand both arguments. I think there should be an asterisk to each argument, though and that IMO would be the credit scores that the person in question possesses. If you're talking someone with scores that are all 700+ (certainly 740+) I think CGIDs argument is very valid. There really is no need to optimize anything at that point, as you're going to be viewed by anyone as having an excellent profile regardless. Where I think SJs argument holds water is if you're talking those with "on the cusp" scores or worse. Basically anything 600's, but definitely anything sub-650 or so. These type of profiles would certainly benefit the most from things like the SSL technique, AZEO, etc. as they could mean 40-50 points more (or less) with their scores. When you have an "on the cusp" type score, 40-50 points can certainly make or break you when someone decides to take a look at your scores/profile.

This! Exactly. And I'm definately on the cusp. My scores, as you can see in my siggy, are just at or below 700. So I'm doing whatever I can to squeeze every 10-20 points out of my score in case I need to buy a car before my time in the garden is up. Which is why I'm trying to figure out, as best as I can, if it's better to keep Macy's or drop Macy's.

What's SSL technique and AZEO??

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 22:29:59 GMT

AZEO stands for "all zero except one." It's a good strategy for squeezing out every extra point in the 40 days prior to an important credit application (or any time you are wanting to get some extra points). The understanding is that the remaining card will report a small balance. AZEO does not help you build a higher score long term.

The SS loan technique is described here:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

It's for people with no open installment loans.

Re: Utilization vs. AAoA

Anonymous — Thu, 13 Jul 2017 22:37:25 GMT

@WhiteCleats wrote:
I'd been reading that trended data is something that's looming for both FICO and Vantage and I was concerned that when the algorithm changed I'd be caught in a less than favorable place.

If you are concerned about creditors beginning to incorporate trended data into their decisions, the best thing you can do there is to make sure you never carry a balance. I.e. if a card reports a balance, be sure to pay it in full in the three weeks following the statement date.

If trended data begin to be used, it will be to identify people who carry CC balances -- such people are called "revolvers" and have been shown to be far greater risks for default and serious delinquency. This is contrast to people who always pay in full -- these people are called Transactors. TD will stretch back for the previous 24 months, so start establishing yourself as a transactor ASAP.