topic Re: How to AZEO? in Understanding FICO® Scoring

How to AZEO?

ridgebackpilot — Wed, 28 Nov 2018 16:02:55 GMT

Friends: I'm planning to implement AZEO (All Zero Except One) on my credit cards. But I've never done this and would appreciate some advice on how to go about it, and how quickly.

As I understand it, the idea is to pay down all cards except one to a zero balance before their monthly statement closing (reporting) dates. Can I pay all but one of my cards down to zero at once without a penalty? Or should I do this over time, card-by-card?

I've got a lot of Chase cards and I understand Chase reports immediately upon paying them down to a zero balance. Is there any special procedures you would recommend when paying Chase cards to AZEO?

Or would you recommend an alternative strategy? Such as paying all my cards down to below 8.9 percent utilization first before going AZEO?

Currently, my utilization on most cards is below 30% but some are around 50-60%. Current FICO 8 scores: EQ 704 TU 708 EX 692.

I'd appreciate your advice and counsel!

Re: How to AZEO?

Remedios — Wed, 28 Nov 2018 16:06:31 GMT

Are you planning an important app?

Because if you're not, you're wasting your time and money

Re: How to AZEO?

RonM21 — Wed, 28 Nov 2018 16:31:16 GMT

@Remedios wrote:
Are you planning an important app?
Because if you're not, you're wasting your time and money

Remedios, respectfully, I would not say it is a waste of time and money if you do not have an immediate app, as if that is an absolute blanket thought. Not saying your thought is incorrect. But there are many variables that can go into why someone chooses to do this, which I why I think there is no blanket answer on it being a waste. I certainly see why you would say that, but in my opinion, it doesn't necessarly apply to everyone.

Like myself, I have no apps coming and have made this my way of handling my cards long ago, just because that is what I'd rather do. It also gives me a goal to shoot for in maintaing my balances and not letting them get out of hand. The Op may just want to stop paying interest on multiple cards, or may like the score boost (even if minimal). Some want to get in the habit of doing it so that later on down the road, when an important app is coming, they are already mentally trained to handle the AZEO method. As I said, I do it, but I do it because I know it keeps my cards/spending in order.

I personally would rather use the AZEO method whether I have anything coming up or not. I feel like if I don't, I am introducing more of a chance for my balances to get out of control. But that is what works for me. To each their own

Re: How to AZEO?

RonM21 — Wed, 28 Nov 2018 16:28:36 GMT

Op, to answer your question, there is no penalty by using this method and paying down your cards except one to zero. I think there is no need to pay all the cards down to below 9% (the alternative method you suggested) if you are willing and have the means to use the AZEO method in the first place.

Re: How to AZEO?

FireMedic1 — Wed, 28 Nov 2018 19:36:08 GMT

@ridgebackpilot wrote:
Friends: I'm planning to implement AZEO (All Zero Except One) on my credit cards. But I've never done this and would appreciate some advice on how to go about it, and how quickly.

As I understand it, the idea is to pay down all cards except one to a zero balance before their monthly statement closing (reporting) dates. Can I pay all but one of my cards down to zero at once without a penalty? Or should I do this over time, card-by-card?

I've got a lot of Chase cards and I understand Chase reports immediately upon paying them down to a zero balance. Is there any special procedures you would recommend when paying Chase cards to AZEO?

Or would you recommend an alternative strategy? Such as paying all my cards down to below 8.9 percent utilization first before going AZEO?

Currently, my utilization on most cards is below 30% but some are around 50-60%. Current FICO 8 scores: EQ 704 TU 708 EX 692.

I'd appreciate your advice and counsel!

Once you get those higher util cards down to AZEO you will see a pretty good size bump in your score. Hope this helps. Post was edited due to trying give advise and others had better ways. GL.

Re: How to AZEO?

HeavenOhio — Wed, 28 Nov 2018 16:44:13 GMT

The value in doing AZEO is so the OP knows how to do it when he needs to. He can also compare his AZEO score to more "natural" reporting. He might find he really wants AZEO for the time being, that more natural reporting is fine, or maybe something in between.

@ridgebackpilot, you can bring your cards to AZEO as quickly as you want. To implement AZEO:

Leave a small balance on one card. That balance should be at least $5 but not much more. The rest of one's cards should report zero.
The card with the small balance should be a major revolver rather than a store card, charge card, or line of credit.
It's easier to simply let Chase cards report zero vs. attempting to maintain a positive balance at all times.

You can test "alternatives," such as going over 8.9% overall or letting more than one card report report a positive balance. Find out how your scores are affected compared to AZEO. You'll probably see dings, but you may find that those dings are acceptable in exchange for more flexibility.

You're definitely going to want to improve on what you have now. "Responsible" borrowing is defined at 28.9% or below, both overall and on individual cards. And your scores are somewhat less than ideal. Watch your scores rise as you move toward AZEO, then reach AZEO, then decide if you want to do further testing.

Re: How to AZEO?

Anonymous — Wed, 28 Nov 2018 17:05:40 GMT

OP, to answer your question, utilization has no memory so it makes no difference if you implement AZEO in one shot or gradually, no one except you would know or care how you come to AZEO and the temporary effects (if any) on scores would be the same. This is why I agree with Remedio that it's a waste of time and money if you have no immediate plans to apply, implementing AZEO the cycle prior to credit applications would suffice, why put on your expensive suit everyday when you work from home?

There are costs in maintaining AZEO/micromanaging UTI at all times in time, energy and money, not to mention stress that comes with. I like to put everything on autopilot, let all charges post to statements and set autopay for full statement balance on due date while my money collects interest in high APY accounts through grace period, no stress no fuss. I can always make a mid-cycle payment after making a LARGE purchase if I wish, or implement AZEO the month before major applications like auto or mortgage if I deem necessary to squeeze the few extra points.

Don't work so hard for your credit, put your credit to work for you.

Re: How to AZEO?

Anonymous — Wed, 28 Nov 2018 16:55:04 GMT

@HeavenOhio wrote:
The value in doing AZEO is so the OP knows how to do it when he needs to.

Or "if he needs to"!

I agree somewhat but I think that Remedios's reply is also useful, because from reading these forums it's easy to get the impression that AZEO is a must if you are going to do things "right". As people (including me!) have commented, AZEO has an real opportunity cost (month after month you are giving up the float on several cards) and people need to be aware of this vs whatever benefits they may expect.

Re: How to AZEO?

Remedios — Wed, 28 Nov 2018 17:22:33 GMT

OP asked for alternative strategies, also.

OP has cards in the 50-60% utilization range. If he drops that below 28.9%, or ideally 8.9%, he'll experience by far more significant scoring gain than from AZEO.

I used to think that AZEO gain is huge, till I tested it.

With aggregate utilization staying under 8.9% and 3 out of 7 cards reporting, I lost whooping 11 points and sky did not fall. This is on a young file, very sensitive to utilization changes.

In my opinion, AZEO is more of a philosophy versus credit management, however, everybody is different, and should do whatever works for them.

Good luck OP with whichever way you chose to tackle this issue

Re: How to AZEO?

HeavenOhio — Wed, 28 Nov 2018 17:44:47 GMT

@Remedios wrote:
I used to think that AZEO gain is huge, till I tested it.

That's why I suggested that the OP test. I think that many or most will find that they can get close enough to their AZEO scores without doing AZEO. And of that group, many will find that they can comfortably deviate quite a bit from AZEO.

Given the OP's current scores, I'd definitely suggest AZEO before applying for a car loan or mortgage. For a credit card application, improving on what he has now without necessarily reaching AZEO would be fine. Overall utilization that's under 28.9% with no card over 28.9% is generally a pretty look. But if that look doesn't produce satisfactory scores, go lower.

We didn't ask the OP if he's currently paying interest. If that's the case, he wants to pay off balances ASAP to reduce the amount of future interest. Also, due to trailing interest, it'll probably take a couple of months to reduce the number of cards reporting positive balances.

Re: How to AZEO?

RonM21 — Wed, 28 Nov 2018 18:01:02 GMT

@Remedios wrote:
In my opinion, AZEO is more of a philosophy versus credit management, however, everybody is different, and should do whatever works for them.

Remedios I agree with you completely. It is somewhat like a philosophy, but everyone does need to do what is best for them. Also on your earlier post, I was just trying to explain ways that AZEO could be useful for some people, but your point is well taken.

Re: How to AZEO?

UpperNwGuy — Wed, 28 Nov 2018 20:35:08 GMT

@Remedios wrote:
Are you planning an important app?
Because if you're not, you're wasting your time and money

@I agree with @Remedios.

Re: How to AZEO?

Anonymous — Wed, 28 Nov 2018 22:09:02 GMT

Personally I like AZEO and tend to stick that way just for simplicity honestly. I don’t like having things auto pay out of my account so I generally pay everything when I get paid in the first week of the month - I only get paid once so this is a bit easier for me than for others - but as someone who used to struggle with high utilization, implementing AZEO on my own actually taught me responsible credit use patterns and now if I ever have more credit taken out than I can PIF, I did it on purpose in my budget.

I dont micro-manage my AZEO to a couple bucks though, I just let one card report less than 8.9% and pay the rest off before the statement cuts. It’s definitely good financial discipline but if you already have that, I can see how it would be seen as an annoyance more than anything.

Re: How to AZEO?

Anonymous — Thu, 29 Nov 2018 01:46:21 GMT

@Remedios wrote:
Are you planning an important app?
Because if you're not, you're wasting your time and money

Not necessarily. AZEO doesn't need to cost anyone a cent nor does it take any time really. What matters most here is whether or not it's worthwhile on the profile of the OP based on where his scores currently sit. Since he does have somewhat "on the cusp" type scores that likely border on the best tier verses second best tier, AZEO could potentially be a positive thing for him. Someone with an 800 score? For them, AZEO would be a waste.

Re: How to AZEO?

Anonymous — Thu, 29 Nov 2018 16:09:37 GMT

@Anonymous wrote:
@Remedios wrote:
Are you planning an important app?
Because if you're not, you're wasting your time and money

Not necessarily. AZEO doesn't need to cost anyone a cent

Well, it sort of does cost, compared to the alternative strategy. If you pay every card in full on due date (via autopay) or just before (manually) you have your money longer and it can be earning interest in, e.g. a high yield savings account with APR currently above 2%

If people count up how many days and how much they are paying early over the course of a year, it's going to be quite a bit more than a cent! Paying before statement cuts generally means three weeks or more of float loss. On nearly all your active cards. Every month.

I encourage AZEO advocates to really run their figures. This "good financial discipline" costs real money. Which doesn't mean it may not be worthwhile, but be aware of the costs vs benefits.

Re: How to AZEO?

ridgebackpilot — Fri, 30 Nov 2018 07:00:37 GMT

Wow, thanks for all these thoughts! I may try an experiment first: Pay all my cards down below 8.9% and see what happens to my scores. No doubt they'll go up, but by how much?

Then, once those scores have stabilized, try AZEO for a couple of months to see if it makes a material difference. It will be interesting to see whether zero balances on most cards result in materially higher scores than all cards below 8.9%...

Re: How to AZEO?

NRB525 — Mon, 03 Dec 2018 18:32:18 GMT

@ridgebackpilot wrote:
Wow, thanks for all these thoughts! I may try an experiment first: Pay all my cards down below 8.9% and see what happens to my scores. No doubt they'll go up, but by how much?

Then, once those scores have stabilized, try AZEO for a couple of months to see if it makes a material difference. It will be interesting to see whether zero balances on most cards result in materially higher scores than all cards below 8.9%...

This ^^^. Do this.

Everyone can agree that getting balances on each and every card below 8% will help scores. If one is also paying interest, getting those balances down saves interest cost, real cash.

Once you get all cards below 8%, take note of your scores. Then you can take the next step of reducing more cards so they report zero on the statement, making sure at least one has a reported balance at any given moment.

At at that point, you can start monitoring whether number of cards is further improving your score, and make the choice whether you want to continue with AZEO, or whether low utilization in general, with cards reporting balances is sufficient

For particular types of apps apps such as a mortgage, reducing number of reporting card balances has benefits but it is not often we apply for a mortgage.

Let us know your progress and results.