topic Re: FICO AMA Discussion Thread in Understanding FICO® Scoring

FICO AMA Discussion Thread

UncleB — Thu, 17 Sep 2020 00:20:37 GMT

We would like to thank Tom Quinn, Tommy Lee, Elizabeth Warren, Paul Panichelli, @Elizabeth_FICO, and all the other folks over at FICO who helped make the AMA a success.

For anyone who missed it, the AMA thread can be found here: https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score-Experts-Ask-us-anything/td-p/6130984

The AMA is now over and the AMA thread is locked, but feel free to continue the discussion in this thread.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 00:33:37 GMT

@UncleB What happened to the rest of the questions being answered

Re: FICO AMA Discussion Thread

K-in-Boston — Thu, 17 Sep 2020 00:46:48 GMT

Please note that due to time constraints and proprietary information, not all questions could be answered. We sincerely thank our guests for answering the numerous questions they were able to address.

As a reminder, all posts on these forums must be Friendly, Supportive, and Respectful.

Re: FICO AMA Discussion Thread

coreysw12 — Thu, 17 Sep 2020 00:51:31 GMT

I found it interesting that an open mortgage is not a requirement for an 850 score. In fact, it sounds like an open mortgage doesn't help your FICO scores any more than any other installment loan. This despite the fact that not having an open mortgage results in a slew of Reason Codes related to not having an open mortgage. I guess reason codes and fico scores are not necessarily related. So I learned that today!

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 01:13:45 GMT

Well we got confirmation that percentages are not rounded using a ceiling function, which means "always round up to next highest percentage." That was advice given on the forums long before I came here in December 2018.

(Link to post)

Note that rounding down to 0% while not triggering the 'no revolving usage' penalty does not disprove what he said. The reason statement for that mentions either 'no recent revolving balances' or 'activity'.

So $50 on $32,000 limit could be 0% like he said, but the balance alone prevents the no usage penalty.

Standard midpoint rounding is used, just like the various CMS front-ends show. (1.5 would be 2, 1.4 would be 1)

That 'less than 8.99%' needs to go as well - also wrong all along. Besides being a pretty severe FCRA violation for misrepresentation of actual utilization percentage, there's no way the midpoint rounding function is going to put that over a whole integer percentage.

We also have confirmation that FICO scoring is using whole dollar balances as reported by the CRAs. (Link to post) So we need to truncate our balances before calculating percentages. (187.84 is 187.00 - cents are never used.)

Note that 2 whole integers can return a fractional amount, but there is no way a senior developer at FICO will make the mistake of using straight floating point variables when it has been widely known for well over a decade that this should never be done with currency calculations. Yet another reason why the 'x.99%' thresholds unnecessarily complicate things.

@SouthJamaica: Score +100 for doubting conventional wisdom! You were using the right percentages all along (from Experian CMS) and I was completely wrong about that, having followed advice handed down throughout the years on the forum. It looked correct the way I was using the ceiling function, so I gave the (wrong) advice as well. Shame on me for not adhering to my own rule of always questioning and testing everything.

Re: FICO AMA Discussion Thread

coreysw12 — Thu, 17 Sep 2020 01:25:16 GMT

So does that mean 9.49% is the new 8.99%?

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 01:40:31 GMT

@coreysw12 wrote:
So does that mean 9.49% is the new 8.99%?

lol

....but no, that's 9% as well!

We have a pretty nice little slightly-less-than-half-percent buffer before going to 10%, and I'm going to push that limit right to the edge on my Mastercard for my October 3B, by letting it report at $189 of $2000 limit (9.45%). That's as close as I can get to 9.5% because only whole dollar amounts are used.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 02:09:46 GMT

We also have official confirmation that revolving balances are considered independent of revolving utilization.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 02:40:44 GMT

Paul Panichelli, Principal Scientist: Both the number and percent of accounts with balances can be factors in a FICO Score calculation. In some cases (consumers with less credit history and/or fewer accounts), even one or two accounts with balances may be too many.

That explains why I am getting the same +19/+14 gains on EQ/TU 8 with 3of4 cards reporting as I did with 1of2 cards reporting. (EX 8 doesn't change.)

I don't think it's because I was at 75% or 50% of cards with a balance - it's probably just a -19/-14 penalty for being at 100% of cards with a balance. I could be wrong about that, but it sure looks that way.

And yes, like he said, even 1 of 2 with a balance was triggering the 'Too many accounts with balances' reason the whole time I had only 2 cards. I definitely had 'less credit history', and still do with under 2 years total revolving credit history and under 3 yrs for the whole file (single installment for 1 year before cards).

Re: FICO AMA Discussion Thread

SouthJamaica — Thu, 17 Sep 2020 02:41:09 GMT

I would like to thank all the FICO staff who participated in providing answers to the questions.

This was quite informative, and -- I dare say -- settles a few bets.

Re: FICO AMA Discussion Thread

Thomas_Thumb — Thu, 17 Sep 2020 03:22:07 GMT

@Anonymous wrote:
We also have official confirmation that revolving balances are considered independent of revolving utilization.

^ Agreed

Thanks to all those who furnished questions and answers

My key confirmations/takeaways were:

1) Aggregate revolving balance is considered as a dollar amount

2) Aggregate revolving balance is considered as a ratio to total available credit (utilization). This factor is more heavily weighed than #1

3) Individual revolving acount utilization is a factor in scoring based on highest card utilization. So step down utilizations across the board - don't leave one card at a high level ... unless it is a 0% APR promotion and the penalty is a non issue to you.

4) Number of accounts with balances is a scoring factor - no clarification on revolvers+ charge card accounts only or if count includes installment loans. Testing suggests installment loans are included in count.

5) Percent of accounts with balances is a scoring factor. No real clarification if that is limited to revolvers + charge cards only.

6) Open mortgages have never been required to get an 850 score. The question not asked/left unanswered is ability to reach 850 with out an installment loan of any type on file (open or closed). I'll have a data point on this later in the year.

7) Zero revolvers with balance penalty and no open loans penalty were known to exist but good to have them validated.

8) True AMEX charge cards (called "open accounts") do not factor into aggregate balance or utilization. However, I wonder if that statement overlooked Fico 98 (EX score 2) where I did see score penalties associated with high reported balances on my AMEX Green card - no impact on Fico 04 (EX score 3)

9) Balances on closed revolving accounts can be included in the aggregate balance and utilization. Wording did not say must - perhaps this can be dictated by the cra.

No insight provided on threshold values for revolving aggregate in $ or %. Good to clarify that rounding is to nearest %. Still think 9% or less is a thing but, the penalty would kick in at 9.5%, not 9.0%. So, the report will say 10%. [side note: Some other scoring models look at utilization to the nearest 0.01% but, our Fico experts state whole numbers are used for Fico models]

Unfortunately, nothing really shared regarding segmentation for scorecards so I'd say stick with collective wisdom gleaned from past FICO presentations.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 03:02:45 GMT

@SouthJamaica wrote:
I would like to thank all the FICO staff who participated in providing answers to the questions.

This was quite informative, and -- I dare say -- settles a few bets.

Yes, it was informative and I'm also thankful they took the time to respond.

Wait....you won actual FICO$ on here?

(I think we're even? If not...I only have about 25 FICOs until my AoYRA hits 1 year. lol)

Re: FICO AMA Discussion Thread

SouthJamaica — Fri, 18 Sep 2020 02:38:47 GMT

@Thomas_Thumb wrote:
@Anonymous wrote:
We also have official confirmation that revolving balances are considered independent of revolving utilization.
^ Agreed

Thanks to all those who furnished questions and answers

My key confirmations/takeaways were:
1) Aggregate revolving balance is considered as a dollar amount
2) Aggregate revolving balance is considered as a ratio to total available credit (utilization). This factor is more heavily weighed than #1
3) Individual revolving acount utilization is a factor in scoring based on highest card utilization. So step down utilizations across the board - don't leave one card at a high level ... unless it is a 0% APR promotion and the penalty is a non issue to you.
4) Number of accounts with balances is a scoring factor - no clarification on revolvers+ charge card accounts only or if count includes installment loans. Testing suggests installment loans are included in count.
5) Percent of accounts with balances is a scoring factor. No real clarification if that is limited to revolvers + charge cards only.
6) Open mortgages have never been required to get an 850 score. The question not asked/left unanswered is ability to reach 850 with out an installment loan of any type on file (open or closed). I'll have a data point on this later in the year.
7) Zero revolvers with balance penalty and no open loans penalty were known to exist but good to have them validated.
8) True AMEX charge cards (called "open accounts") do not factor into aggregate balance or utilization. However, I wonder if that statement overlooked Fico 98 (EX score 2) where I did see score penalties associated with high reported balances on my AMEX Green card - no impact on Fico 04 (EX score 3)
9) Balances on closed revolving accounts can be included in the aggregate balance and utilization. Wording did not say must - perhaps this can be dictated by the cra.

No insight provided on threshold values for revolving aggregate in $ or %. Good to clarify that rounding is to nearest %. Still think under 9% or less is a thing but, the penalty would kick in at 9.5%, not 9.0%. So, the report will say 10%. [side note: Some other scoring models look at utilization to the nearest 0.01% but, the text answers mention whole numbers for Fico models]

Unfortunately, nothing really shared regarding segmentation for scorecards so I'd say stick with collective wisdom gleaned from past FICO presentations.

The key takeaways for me were:

1. balances expressed in raw dollars are a factor, but weighted less heavily than balances expressed as a percentage

2. balances on closed accounts may be considered in revolving utilization (but the answers were unclear as to whether the limits on those accounts can be considered as well)

3. the 'front end' analytics on the website are not 'fluff' but are part of the analytics that go into developing the scores

4. the percentages rounded to the nearest integer, which are found in the 'front end' analytics, are the percentages which affect the scores

5. the all zero penalty and the no open loan penalty are definitely part of FICO's plan

6. according to FICO the above penalties are not based on any philosophy, but on experience that all-zero balances are slightly more predictive of risk than low balances

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 03:27:22 GMT

It would've been nice to have more clarification about that AU utilizations question

I just had my AU charge reporting a balance along with 1 revolver and my score is lower than before, all things the same.

Trying to dispute it on EX and Amex verifies it as accurate

TU lets me delete it instant and my score rises

Re: FICO AMA Discussion Thread

Thomas_Thumb — Thu, 17 Sep 2020 03:32:08 GMT

@Anonymous wrote:
It would've been nice to have more clarification about that AU utilizations question

I just had my AU charge reporting a balance along with 1 revolver and my score is lower than before, all things the same.

Trying to dispute it on EX and Amex verifies it as accurate

TU lets me delete it instant and my score rises

Not sure they could provide a simple answer. The whole AU account evaluation is convoluted with the anti-abuse half baked algorithm.

Re: FICO AMA Discussion Thread

Brian_Earl_Spilner — Thu, 17 Sep 2020 03:38:12 GMT

It was interesting to learn that percentage of on time payments is indeed factored in despite conventional wisdom on here.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 04:01:55 GMT

@Brian_Earl_Spilner wrote:
It was interesting to learn that percentage of on time payments is indeed factored in despite conventional wisdom on here.

@Brian_Earl_SpilnerI'm not sure that was resolved in that context. Anything less than 100% penalizes. (Exceptions are new files that dont' have any established payment history. Obviously a certain minimum amount of payment history has to established.) Anything can be converted to a percentage and the more lates, the more penalty and the percentage drops.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 04:02:53 GMT

@Thomas_Thumb wrote:
@Anonymous wrote:
We also have official confirmation that revolving balances are considered independent of revolving utilization.
^ Agreed

Thanks to all those who furnished questions and answers

My key confirmations/takeaways were:
1) Aggregate revolving balance is considered as a dollar amount
2) Aggregate revolving balance is considered as a ratio to total available credit (utilization). This factor is more heavily weighed than #1
3) Individual revolving acount utilization is a factor in scoring based on highest card utilization. So step down utilizations across the board - don't leave one card at a high level ... unless it is a 0% APR promotion and the penalty is a non issue to you.
4) Number of accounts with balances is a scoring factor - no clarification on revolvers+ charge card accounts only or if count includes installment loans. Testing suggests installment loans are included in count.
5) Percent of accounts with balances is a scoring factor. No real clarification if that is limited to revolvers + charge cards only.
6) Open mortgages have never been required to get an 850 score. The question not asked/left unanswered is ability to reach 850 with out an installment loan of any type on file (open or closed). I'll have a data point on this later in the year.
7) Zero revolvers with balance penalty and no open loans penalty were known to exist but good to have them validated.
8) True AMEX charge cards (called "open accounts") do not factor into aggregate balance or utilization. However, I wonder if that statement overlooked Fico 98 (EX score 2) where I did see score penalties associated with high reported balances on my AMEX Green card - no impact on Fico 04 (EX score 3)
9) Balances on closed revolving accounts can be included in the aggregate balance and utilization. Wording did not say must - perhaps this can be dictated by the cra.

No insight provided on threshold values for revolving aggregate in $ or %. Good to clarify that rounding is to nearest %. Still think 9% or less is a thing but, the penalty would kick in at 9.5%, not 9.0%. So, the report will say 10%. [side note: Some other scoring models look at utilization to the nearest 0.01% but, our Fico experts state whole numbers are used for Fico models]

Unfortunately, nothing really shared regarding segmentation for scorecards so I'd say stick with collective wisdom gleaned from past FICO presentations.

Totally agreed, with the caveat that I believe there are 2 scoring factors, or as they call them, characteristics; there may be 4: #of revolvers w/ a bal, # of accts, w/ a bal, % of revolvers w/ a balance , and % of accounts with a balance. Seems # is more prevalent in thin or young files whereas % trumps in thick or mature files.

Re: FICO AMA Discussion Thread

Brian_Earl_Spilner — Thu, 17 Sep 2020 03:57:58 GMT

@Anonymous wrote:
@Brian_Earl_Spilner wrote:
It was interesting to learn that percentage of on time payments is indeed factored in despite conventional wisdom on here.
@Brian_Earl_SpilnerI'm not sure that was resolved in that context. Anything less than 100% penalizes. (Exceptions are new files that dont' have any established payment history.) Anything can be converted to a percentage and the more lates, the more penalty and the percentage drops drops.

It pretty much was. While they weren't talking about the higher percentage of on time payments on an account, they mention number of accounts that are paid as agreed. That would mean adding more on time accounts would have a positive outcome for someone that has missed a payment.

Re: FICO AMA Discussion Thread

Anonymous — Thu, 17 Sep 2020 04:00:57 GMT

@Brian_Earl_Spilner wrote:
@Anonymous wrote:
@Brian_Earl_Spilner wrote:
It was interesting to learn that percentage of on time payments is indeed factored in despite conventional wisdom on here.
@Brian_Earl_SpilnerI'm not sure that was resolved in that context. Anything less than 100% penalizes. (Exceptions are new files that dont' have any established payment history.) Anything can be converted to a percentage and the more lates, the more penalty and the percentage drops drops.
It pretty much was. While they weren't talking about the higher percentage of on time payments on an account, they mention number of accounts that are paid as agreed. That would mean adding more on time accounts would have a positive outcome for someone that has missed a payment.

Respectfully I think they were referring to when you add your second and third revolving accounts, which adds points by reducing the too few bankcard penalty. Jmho.