topic Re: Penalty For A Zero Balance Reporting? Non-usage in Understanding FICO® Scoring

Penalty For A Zero Balance Reporting? Non-usage

Iusedtolurk — Mon, 11 Jan 2021 19:34:24 GMT

I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

Re: Penalty For A Zero Balance Reporting? Non-usage

SouthJamaica — Mon, 11 Jan 2021 20:00:51 GMT

@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

From a scoring perspective, the more zero balances the better, except that you should let at least one card report a small balance as opposed to having all accounts report zero balances.

From a bank-customer relationship standpoint, it's best not to let a card go unused for too long. But the bank doesn't care what the reported balance is, it just cares that you used the card. So if you use the card, and then pay it off before the statement, that's fine.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Mon, 11 Jan 2021 20:13:52 GMT

@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

@Iusedtolurk it has been theorized that if an account is not used for so long it may have some sort of effect. This has mostly been fueled by the dormant account alerts offered by various CMS to alert you when an account that hasn't been used in a while is used, in case it was a fraudulent use. This is a service provided by the CMS and has nothing to do with the workings of the algorithm.

I haven't been able to nail down any gain or loss attributable to this. There was a report of someone having a point change when they received the dormant account alert, but that was a isolated report, so there's no way to know that that's what caused it. Unless it's repeatable, we can't rely on it. Maybe in the future with more data points, we may know more, but for the time being, the data hasn't shown there's an effect in my humble opinion. I am open to more data or data I have missed.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Mon, 11 Jan 2021 20:22:04 GMT

As a matter fact, it wasn’t too long ago that data point was reported, and it was very shortly thereafter I had 2 dormant accounts report with no point change.

Re: Penalty For A Zero Balance Reporting? Non-usage

Iusedtolurk — Mon, 11 Jan 2021 20:50:58 GMT

@SouthJamaica wrote:
@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

From a scoring perspective, the more zero balances the better, except that you should let at least one card report a small balance as opposed to having all accounts report zero balances.

From a bank-customer relationship standpoint, it's best not to let a card go unused for too long. But the bank doesn't care what the reported balance is, it just cares that you used the card. So if you use the card, and then pay it off before the statement, that's fine.

Be awhile before I do azeo not planning any major apps for awhile but planning on reducing number of balances reporting so when the time comes for azeo it will be easier financially to accomplish. Plan on utilizing most cards to keep showing activity to keep bank-customer relationship on the good side.

Re: Penalty For A Zero Balance Reporting? Non-usage

Iusedtolurk — Mon, 11 Jan 2021 21:02:11 GMT

@Anonymous wrote:
@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

@Iusedtolurk it has been theorized that if an account is not used for so long it may have some sort of effect. This has mostly been fueled by the dormant account alerts offered by various CMS to alert you when an account that hasn't been used in a while is used, in case it was a fraudulent use. This is a service provided by the CMS and has nothing to do with the workings of the algorithm.

I haven't been able to nail down any gain or loss attributable to this. There was a report of someone having a point change when they received the dormant account alert, but that was a isolated report, so there's no way to know that that's what caused it. Unless it's repeatable, we can't rely on it. Maybe in the future with more data points, we may know more, but for the time being, the data hasn't shown there's an effect in my humble opinion. I am open to more data or data I have missed.

@Anonymous Good to know about the no effect. Trying to avoid all the surprise pitfalls of the algorithms. Too bad that in the beginning of my journey I was under the impression that an open installment loan helped creditwise so I was getting a couple of personal loans to fill that criteria and when they were paid off I would get another one. BUT unknown to me at the time I didn't know they were being classified as CFA which are negatives to the algorithms.

Now when I see scores reasons in certain FICO score models, "Too many consumer finance accounts" shows up. for example in Fico 2,4,5 scores.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Mon, 11 Jan 2021 21:42:58 GMT

@Iusedtolurk wrote:
@Anonymous wrote:
@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

@Iusedtolurk it has been theorized that if an account is not used for so long it may have some sort of effect. This has mostly been fueled by the dormant account alerts offered by various CMS to alert you when an account that hasn't been used in a while is used, in case it was a fraudulent use. This is a service provided by the CMS and has nothing to do with the workings of the algorithm.

I haven't been able to nail down any gain or loss attributable to this. There was a report of someone having a point change when they received the dormant account alert, but that was a isolated report, so there's no way to know that that's what caused it. Unless it's repeatable, we can't rely on it. Maybe in the future with more data points, we may know more, but for the time being, the data hasn't shown there's an effect in my humble opinion. I am open to more data or data I have missed.
@Anonymous Good to know about the no effect. Trying to avoid all the surprise pitfalls of the algorithms. Too bad that in the beginning of my journey I was under the impression that an open installment loan helped creditwise so I was getting a couple of personal loans to fill that criteria and when they were paid off I would get another one. BUT unknown to me at the time I didn't know they were being classified as CFA which are negatives to the algorithms.

Now when I see scores reasons in certain FICO score models, "Too many consumer finance accounts" shows up. for example in Fico 2,4,5 scores.

@Iusedtolurk i'm sorry to hear that. That's one of the most complained about hidden pitfalls of the algorithm I think in my opinion.

It does help scorewise to have a open installment loan with aggregate utilization under 10%, for versions 8/9. But you definitely want to do it through a bank/CU, not a finance company as you unfortunately learned the hard way.

Also, you don't want to continue to successively do short-term loans and lower your ages. Preferably get a five-year one and that way you don't have to open them that often.

not much you can do about the CFA but wait them out, but it's my understanding it's not a huge penalty, but we haven't been able to quantify it.

One thing about it, if you're seeing that code, then you don't have a lot of big problems to hide that code. So you can look at it in a positive way like that.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 00:38:41 GMT

@Anonymous wrote:
@Iusedtolurk wrote:
@Anonymous wrote:
@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

@Iusedtolurk it has been theorized that if an account is not used for so long it may have some sort of effect. This has mostly been fueled by the dormant account alerts offered by various CMS to alert you when an account that hasn't been used in a while is used, in case it was a fraudulent use. This is a service provided by the CMS and has nothing to do with the workings of the algorithm.

I haven't been able to nail down any gain or loss attributable to this. There was a report of someone having a point change when they received the dormant account alert, but that was a isolated report, so there's no way to know that that's what caused it. Unless it's repeatable, we can't rely on it. Maybe in the future with more data points, we may know more, but for the time being, the data hasn't shown there's an effect in my humble opinion. I am open to more data or data I have missed.
@Anonymous Good to know about the no effect. Trying to avoid all the surprise pitfalls of the algorithms. Too bad that in the beginning of my journey I was under the impression that an open installment loan helped creditwise so I was getting a couple of personal loans to fill that criteria and when they were paid off I would get another one. BUT unknown to me at the time I didn't know they were being classified as CFA which are negatives to the algorithms.

Now when I see scores reasons in certain FICO score models, "Too many consumer finance accounts" shows up. for example in Fico 2,4,5 scores.
@Iusedtolurk i'm sorry to hear that. That's one of the most complained about hidden pitfalls of the algorithm I think in my opinion.

It does help scorewise to have a open installment loan with aggregate utilization under 10%, for versions 8/9. But you definitely want to do it through a bank/CU, not a finance company as you unfortunately learned the hard way.

Also, you don't want to continue to successively do short-term loans and lower your ages. Preferably get a five-year one and that way you don't have to open them that often.

not much you can do about the CFA but wait them out, but it's my understanding it's not a huge penalty, but we haven't been able to quantify it.

One thing about it, if you're seeing that code, then you don't have a lot of big problems to hide that code. So you can look at it in a positive way like that.

I had my 4 x CFAs age off (finally) and actually saw a good score increase. These were entirely positve TLs. +19 to +22 pts across the 5/4/2 mortgage scores on dirty/PR scorecards.

SO saw +39pt EQ5 on a dirty (non-PR) scorecard when his 2 x CFAs (totally positive TLs) aged out. This one may be a bit less concise as the other gains listed abive for me, as there is still question if this was 100% isolated.

Re: Penalty For A Zero Balance Reporting? Non-usage

Iusedtolurk — Tue, 12 Jan 2021 01:27:29 GMT

@Anonymous wrote:
I had my 4 x CFAs age off (finally) and actually saw a good score increase. These were entirely positve TLs. +19 to +22 pts across the 5/4/2 mortgage scores on dirty/PR scorecards.

SO saw +39pt EQ5 on a dirty (non-PR) scorecard when his 2 x CFAs (totally positive TLs) aged out. This one may be a bit less concise as the other gains listed abive for me, as there is still question if this was 100% isolated.

Those are pretty significant point gains imho. I have a total of 3 coded as a CFA:

1-2yrs 10 months

1-1yr 10 months

1-1 yr 3 months

Being so young and good accounts I guess I will be locked away from those point gains for too long to even care. Pretty stiff penalty for not knowing beforehand the negative effects of a CFA.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 02:35:00 GMT

@Anonymous wrote:
@Anonymous wrote:
@Iusedtolurk wrote:
@Anonymous wrote:
@Iusedtolurk wrote:
I believe I read something about this but haven't came across it again.

Is there some type of penalty that occurs if you carry a zero balance on a card for too long making it seem like you are not using the card and then when you use it you get hit with a sorta dormant account now being used penalty.

In the near future I will be paying some cards in full so they will be reporting zero balances (reducing the number of accounts with balances).

I don't want them to report zero balance for too long and end up getting a penalty when I let a balance report.

@Iusedtolurk it has been theorized that if an account is not used for so long it may have some sort of effect. This has mostly been fueled by the dormant account alerts offered by various CMS to alert you when an account that hasn't been used in a while is used, in case it was a fraudulent use. This is a service provided by the CMS and has nothing to do with the workings of the algorithm.

I haven't been able to nail down any gain or loss attributable to this. There was a report of someone having a point change when they received the dormant account alert, but that was a isolated report, so there's no way to know that that's what caused it. Unless it's repeatable, we can't rely on it. Maybe in the future with more data points, we may know more, but for the time being, the data hasn't shown there's an effect in my humble opinion. I am open to more data or data I have missed.
@Anonymous Good to know about the no effect. Trying to avoid all the surprise pitfalls of the algorithms. Too bad that in the beginning of my journey I was under the impression that an open installment loan helped creditwise so I was getting a couple of personal loans to fill that criteria and when they were paid off I would get another one. BUT unknown to me at the time I didn't know they were being classified as CFA which are negatives to the algorithms.

Now when I see scores reasons in certain FICO score models, "Too many consumer finance accounts" shows up. for example in Fico 2,4,5 scores.
@Iusedtolurk i'm sorry to hear that. That's one of the most complained about hidden pitfalls of the algorithm I think in my opinion.

It does help scorewise to have a open installment loan with aggregate utilization under 10%, for versions 8/9. But you definitely want to do it through a bank/CU, not a finance company as you unfortunately learned the hard way.

Also, you don't want to continue to successively do short-term loans and lower your ages. Preferably get a five-year one and that way you don't have to open them that often.

not much you can do about the CFA but wait them out, but it's my understanding it's not a huge penalty, but we haven't been able to quantify it.

One thing about it, if you're seeing that code, then you don't have a lot of big problems to hide that code. So you can look at it in a positive way like that.
I had my 4 x CFAs age off (finally) and actually saw a good score increase. These were entirely positve TLs. +19 to +22 pts across the 5/4/2 mortgage scores on dirty/PR scorecards.

SO saw +39pt EQ5 on a dirty (non-PR) scorecard when his 2 x CFAs (totally positive TLs) aged out. This one may be a bit less concise as the other gains listed abive for me, as there is still question if this was 100% isolated.

@Anonymous wow, weren't those the oldest accounts as well? So didn't it affect average ages? Or was it isolated to the CFA's? Because that's a lot more points than I thought it was worth.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 03:55:41 GMT

@Anonymous wow, weren't those the oldest accounts as well? So didn't it affect average ages? Or was it isolated to the CFA's?

@Anonymous , they were not the oldest accounts. I have 2 accounts that are older, so my AAoA actually went down a couple months, when these 4 CFAs aged off. 9y 1m > 8y 7m per MyFico. My AoOA went up 1 month since this was from 11/20 > 12/20.

It was always thought the points must be negligible, but we never had really seen an isolated case to determine the value.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 08:26:15 GMT

@Anonymous wrote:

@Anonymous wow, weren't those the oldest accounts as well? So didn't it affect average ages? Or was it isolated to the CFA's?

@Anonymous , they were not the oldest accounts. I have 2 accounts that are older, so my AAoA actually went down a couple months, when these 4 CFAs aged off. 9y 1m > 8y 7m per MyFico. My AoOA went up 1 month since this was from 11/20 > 12/20.

It was always thought the points must be negligible, but we never had really seen an isolated case to determine the value.

@Anonymous The CFA's were paid and not derogatory? Do not rely on MF's calculation of ages. Please re-calculate it yourself. And if you're AAoA was that high, then I don't think it affected it.

if in fact those calculations are correct and your AAoA was that high and the CFAs had become positive at least, then these are awesome data points!! It's crazy how much 'knowledge' has been overturned these past couple years!

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 11:12:02 GMT

@Anonymous wrote:
@Anonymous wrote:

@Anonymous wow, weren't those the oldest accounts as well? So didn't it affect average ages? Or was it isolated to the CFA's?

@Anonymous , they were not the oldest accounts. I have 2 accounts that are older, so my AAoA actually went down a couple months, when these 4 CFAs aged off. 9y 1m > 8y 7m per MyFico. My AoOA went up 1 month since this was from 11/20 > 12/20.

It was always thought the points must be negligible, but we never had really seen an isolated case to determine the value.
@Anonymous The CFA's were paid and not derogatory? Do not rely on MF's calculation of ages. Please re-calculate it yourself. And if you're AAoA was that high, then I don't think it affected it.

if in fact those calculations are correct and your AAoA was that high and the CFAs had become positive at least, then these are awesome data points!! It's crazy how much 'knowledge' has been overturned these past couple years!

They were positive TLs, paid/closed. Not all of my accounts were derogs.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 11:38:45 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:

@Anonymous wow, weren't those the oldest accounts as well? So didn't it affect average ages? Or was it isolated to the CFA's?

@Anonymous , they were not the oldest accounts. I have 2 accounts that are older, so my AAoA actually went down a couple months, when these 4 CFAs aged off. 9y 1m > 8y 7m per MyFico. My AoOA went up 1 month since this was from 11/20 > 12/20.

It was always thought the points must be negligible, but we never had really seen an isolated case to determine the value.
@Anonymous The CFA's were paid and not derogatory? Do not rely on MF's calculation of ages. Please re-calculate it yourself. And if you're AAoA was that high, then I don't think it affected it.

if in fact those calculations are correct and your AAoA was that high and the CFAs had become positive at least, then these are awesome data points!! It's crazy how much 'knowledge' has been overturned these past couple years!
They were positive TLs, paid/closed. Not all of my accounts were derogs.

@Anonymous did you double check the calculations on the dates yourself? For average age? If so, I've got a put this in the Primer!

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 11:41:27 GMT

@Anonymous was there a score change on version 8/9?

@Revelate @Thomas_Thumb @Anonymous you might wanna see this!

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 14:32:55 GMT

@Anonymous wrote:
@Anonymous was there a score change on version 8/9?

@Revelate @Thomas_Thumb @Anonymous you might wanna see this!

I will have to double check the AAoA math, because as you know, my MyFico and EQ ACR CRs show different AAoA between them (AoOA is the same, though).

I am at work, but I will bust out the reports and calculator tonight.

I will have to double check the F8/F9 changes, but off the top of my head, I believe there was no change.

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 15:26:23 GMT

I guess my next question would be regarding whether or not diminishing returns exist with respect to CFAs, the way they do with other adverse-scoring impact items like delinquencies for example. What I mean is if we quantify the gain for 4 CFAs dropping off as being worth (say) 20 points gained, are we therefore quantifying each CFA as being worth 5 points? Or, do we believe that if there was only 1 CFA present that its removal would also be worth 20 points and because there was already 1, the other 3 didn't really matter when it came to scoring impact?

If we're saying that 1 CFA is worth 20 points, I would agree that it's significant. If we're saying that one in and of itself is worth 5 points, I'd consider that personally to be insignificant.

Just trying to further quantify the quantification thus far. Great info for sure though!

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 17:00:05 GMT

@Anonymous wrote:
I guess my next question would be regarding whether or not diminishing returns exist with respect to CFAs, the way they do with other adverse-scoring impact items like delinquencies for example. What I mean is if we quantify the gain for 4 CFAs dropping off as being worth (say) 20 points gained, are we therefore quantifying each CFA as being worth 5 points? Or, do we believe that if there was only 1 CFA present that its removal would also be worth 20 points and because there was already 1, the other 3 didn't really matter when it came to scoring impact?

If we're saying that 1 CFA is worth 20 points, I would agree that it's significant. If we're saying that one in and of itself is worth 5 points, I'd consider that personally to be insignificant.

Just trying to further quantify the quantification thus far. Great info for sure though!

SO had 2 x CFAs drop and saw +39 pt gain in EQ5, so I think of it as an all or none when it comes to CFAs and scoring penalty.

like CAs.

Mine might have had less of a scoring increase due to being on a Dirty/PR scorecard while SO is on a Dirty/non-PR scorecard. Perhaps the affects is even more pronounced for clean scorecards?

Re: Penalty For A Zero Balance Reporting? Non-usage

Anonymous — Tue, 12 Jan 2021 21:42:49 GMT

That could definitely be the case. I would think we'd see the CFA negative reason code higher up on the list though on clean scorecards, as not much other than high utilization IMO would rank higher points wise if you're taking negative payment history items out of the mix.

Re: Penalty For A Zero Balance Reporting? Non-usage

Revelate — Wed, 13 Jan 2021 00:22:49 GMT

Interesting. TY for the datapoint re CFAs.

For me my CFA has always been in the #4 position I believe on all scores that I've ever received reason codes for and sometimes it's been below that depending how many variable things I have wrong with my file (inquiries, new accounts, wayward utilization, etc) where it can be pushed off the table easily, wasn't expecting a 39 point swing on FICO 8 certainly. Out of curiosity do you have before and after reason codes? That seems high for a small modification of an existing scorecard to me but hard to say without much closer analysis.

Unfortunately I haven't been in the same bucket on TU (stupid lates on the JCB tradeline sorry y'all for being dumb) screw up the analysis as my CFA is only on EX/EQ. Mine is still another 18 months away from falling off.

That large of a penalty when my file was at it's cleanest I wonder if I would've already hit 850, just seems way too high to me for that namely 30D late territory.