topic Re: AZEO in Understanding FICO® Scoring

AZEO

Eighthundredbound — Fri, 15 May 2020 01:08:54 GMT

I'm totally confused. So with AZEO all credit cards are zero except one which carries a balance as long as this individual card is kept at an 8% or less (not 0) CU. OK, easy to achieve but I thought that having a small balance with a CU under 1% on individual cards was a good thing. I say this becsuse I read somewhere that a zero balance on an individual card is predictive of future default since it's not being used. It doesn't make sense but it's how I interpreted what I read. It also stated that the score is a reflection of ones ability to handle credit. A zero balance is a missed opportunity to demonstrate good credit behavior. Perhaps I'm wrong. Is the AZEO method meant to trigger an ideal score for the aggregate of cards but irrelevent for the individual cards or vise versa?

Thanks for any responses in advance.

Re: AZEO

SouthJamaica — Fri, 15 May 2020 01:20:39 GMT

@Eighthundredbound wrote:
I'm totally confused. So with AZEO all credit cards are zero except one which carries a balance

Not "carries" a balance, "reports" a balance.

as long as this individual card is kept at an 8% or less

It needs to report at 28% or less, but 8% would be even better.

(not 0) CU. OK, easy to achieve but I thought that having a small balance with a CU under 1% on individual cards was a good thing.

I don't know what you're referring to. There's no need to report a balance of only 1%.

I say this becsuse I read somewhere that a zero balance on an individual card is predictive of future default

Not so. I doubt that's what you read. It's helpful to have plenty of cards report a zero balance.

since it's not being used. It doesn't make sense but it's how I interpreted what I read.

Perhaps you misinterpreted. Perhaps what you read was wrong.

It also stated that the score is a reflection of ones ability to handle credit.

It's not. It's just an algorithm.

A zero balance is a missed opportunity to demonstrate good credit behavior. Perhaps I'm wrong.

Yes you're wrong.

Is the AZEO method meant to trigger an ideal score for the aggregate of cards but irrelevent for the individual cards or vise versa?

The AZEO method is insurance against being penalized on the revolving utilization factor in any scoring model. It is most important for the older scoring models, especially the all important mortgage scores.

Thanks for any responses in advance.

Re: AZEO

Ficoproblems247 — Fri, 15 May 2020 02:19:08 GMT

+1 to everything that @SouthJamaica stated. I just wanted to make a comment to circle back about a point you brought up on your earlier thread about the same thing. You had mentioned that you thought that the less debt, all the way down to 0, would increase your scores. You are essentially correct until you actually hit the 0 mark. AZEO is like that very last step between showing minimal use, just enough so you don't incur the score penalty, and actual 0 on all accounts. It's not something you need to worry about and practice each month, rather only something to worry about implementing the month before you apply for something. What you mentioned about being better off showing use on your cards each month is something discussed a lot, but most would say to let whatever you spend each month report on your statement, pay that statement off in full, rinse and repeat. (As long as those balances don't put you at high utilization if you happen to have low limit cards.) As mentioned earlier, AZEO will not have the effect on your regular FICO 8 scores like it does to your mortgage scores- your EX 2, TU 4, and EQ 5, and some

older versions of FICO. Think of AZEO as how you would take the time to make yourself look for an important photo shoot, a snapshot of your profile for a month for an important app, then think of letting your organic balances report monthly as how you would normally look on a day to day basis. Maybe not the best anology in the world but I hope it makes some sens at least. I'm glad you asked the question. AZEO is talked about in a lot of different ways, and although the concept is totally simple, how and when to utilize it seems more complicated sometimes.

Re: AZEO

BmoreBull — Fri, 15 May 2020 14:11:07 GMT

+1 @Ficoproblems247. I’ve been practicing AZEO because I’m rebuilding. So I want my snapshot to always look like I’m going to a red carpet event 😂. For now at least in the building stages. That way I look really responsible with my credit usage versus my credit limits. Once my scores are up a little bit higher I probably won’t worry as much about AZEO. Just use my cards regularly and keep them pif so I don’t incur interest charges. Never ever let all your cards report zero. Made that mistake once and was hit with the 20 point penalty. That’s devastating to someone with fragile scores like mine.

Re: AZEO

Dmessina666 — Fri, 15 May 2020 16:09:03 GMT

So you know, it's just a recommendation. Especially if you're trying to get a mortgage or auto loan, the AZEO will optimize your score prior to applying. You said something like using your cards to show them you are credit worthy.....you can use all your cards. If you want your reports to show AZEO tho, PIF your balances prior to the statement closing dates. Creditors report "usually" 1-2 days after the monthly statement closes.

Of course, that's if you can pay your balances in full every month. Obviously, not everyone can. But nobody is saying you can't use your cards. Use them, pay them off before that date, and you're reports will show AZEO. Just don't ever let all your cards report $0. That would gut your score for quite a few points.

Test it out. Try keeping it under 30% for a month and see what your score does. The next month, bring your utilization down below 10% and see what the change in score is. Everyone's report is different, like a fingerprint. Play around and see what works better for you. I'm no teacher, not by far, just some advice on what worked for me. Good luck.

Re: AZEO

Eighthundredbound — Fri, 15 May 2020 19:30:03 GMT

Thanks @SouthJamaica and @Ficoproblems247

Re: AZEO

Eighthundredbound — Fri, 15 May 2020 19:40:46 GMT

@Dmessina666 thanks so much for that great advice. I pay off in full every month and my CU hovers around 1-2%. I have 2 charge-offs, one of which carries the full original balance and the other settled for less. Both will be aging off in the next several months so I'm hoping to see a nice boost in score. I've plateaued at EQ 672, EX 709 and TU 744.

To clarify, you said what I suspected - a small reported balance on each credit card is better than 0 as far as optimal scoring is concerned. Is that correct? It's easy enough for me to do if it makes a significant difference (>5-10 points).

Thanks again for your excellent opinions.

Re: AZEO

Dmessina666 — Fri, 15 May 2020 19:45:39 GMT

Of course. The lower the Utilization, the better. Just when your're about to take out a loan/mortgage, hit the AZEO and get it under 10%, preferably 5-7% before they run your report. Any time other than that, do what works for you. Like I said, everyone is different. When those CO's finally fall off, your credit file will be rebucketed into a clean file. (If theres nothing else bad on your report that is....late payements etc.)

Good Luck

Re: AZEO

SouthJamaica — Sat, 16 May 2020 02:14:13 GMT

@Eighthundredbound wrote:
@Dmessina666 thanks so much for that great advice. I pay off in full every month and my CU hovers around 1-2%. I have 2 charge-offs, one of which carries the full original balance and the other settled for less. Both will be aging off in the next several months so I'm hoping to see a nice boost in score. I've plateaued at EQ 672, EX 709 and TU 744.

To clarify, you said what I suspected - a small reported balance on each credit card is better than 0 as far as optimal scoring is concerned. Is that correct?

NO IT'S NOT CORRECT, AS I TOLD YOU ABOVE

It's easy enough for me to do if it makes a significant difference (>5-10 points).

Thanks again for your excellent opinions.