topic Re: FICO Scoring Craziness in Understanding FICO® Scoring

FICO Scoring Craziness

Junejer — Wed, 28 Jun 2023 21:18:12 GMT

I was debating whether or not to start a thread on this subject and was mostly convinced not to until I just got a scoring update from EQ +2 to 840 for no apparent reason (not looking the gift horse in the mouth, by the way).

New account is my BoA car loan at 9 months. AAoA is 7yrs7mos. Not ancient and not young either. Oldest account 15yrs7mos.

I guess they're going to hold Genesis Finance against me for the next 10 years. Not going to turn down 2.99% plus all kinds of other rebates. Something really needs to be done about considering these types of loans to be CFAs.

Seeking credit. I have one INQ on EQ from August. I initially wanted to go through PenFed for the loan, but 5%+ was the going rate at that time. I chose the lower rate option.

Accounts with balances. I have an AU account showing a balance of $10 and three CCs showing balances of $41. $92 and $298. I have noticed that EQ is quite a bit more sensitive to AZEO than EX is. EX is non-plused when I report up to AZE4. In a few days, I will report AZEO with a balance of just $41. I'll see what happens to the score then. I'm on a quest to get to 850, but don't think I will ever get there with Genesis Finance showing.

While I have your attention, allow me to rant a bit about the all zero penalty. I think it is really stupid, regardless of how many profiles have been studied to determine that one is more likely to run up a ton of debt with all zero balances. There needs to be a reasonable cutoff. All zero, you're a risk AZEO with $5 reporting you're the best kind of credit risk--baloney!!! It should be based on some sort of percentage of overall available credit or some sort of meaningful dollar amount. It's a game (that is clearly working in their favor) to keep us zealots microfocused on our credit reports and spending money on CMS, etc. I'm sorry, but there just is no defense for the all zero penalty. At least, I haven't heard an argument that has swayed my thinking.

Re: FICO Scoring Craziness

Junejer — Thu, 29 Jun 2023 02:27:48 GMT

After further digging, the reason for the two-point bump is because the $92 balance is now reporting $0. Now AZE2.

Re: FICO Scoring Craziness

GApeachy — Thu, 29 Jun 2023 03:04:33 GMT

@Junejer wrote:
At least, I haven't heard an argument that has swayed my thinking.

You gotta give them something to score..............

Two gymnasts competing for highest score.

The first gymnast is a 5x gold medalist.

The second gymnast first time competitor.

First Gymnast, Gold Medalist, sprains ankle during warm up is forced to sit out entire competition.

Second Gymnast, First Time Competitor, falls off balance beam, sprains ankle, manages remount to finish last of 4 routines.

How many gymnasts earned a score?

Who does not maintain score standing?

Re: FICO Scoring Craziness

Junejer — Thu, 29 Jun 2023 03:14:53 GMT

Nice try and understand your thinking. I am giving them something to score. I have "x amount" of credit available in my denomenator and am using my credit wisely by paying it off in full each month (without the games). And, they still score your report with $0/X, they just decide to ding you for it and then tell us that $1/X makes me that much more of a better credit risk.

Re: FICO Scoring Craziness

GApeachy — Thu, 29 Jun 2023 03:36:33 GMT

Well I don't like it either, it goes against the grain but If you're using 0% of your credit you're not showing the algorithm you are handling your credit. You're not giving the algorithm anything to score.

What's the saying around here? Fico has no memory? So it appears you have to continuously give something to get something in return from absentminded Fico algorithm.

Re: FICO Scoring Craziness

SouthJamaica — Thu, 29 Jun 2023 13:36:46 GMT

Reporting a zero balance does not indicate you are not using your credit. There are various fields in the credit report which indicate that you have used your credit during the month.

Neither the all zero penalty in revolving credit nor the no open loan penalty in installment credit make any sense from a risk avoidance standpoint, which is supposedly the reason for FICO scores. Having paid off all of one's loans, and having paid off all of one's credit cards, makes the borrower less risky, not more risky.

I have a hunch that FICO is not just about risk, it's also about reward. It attempts to locate the more profitable potential customers, and weed out the less profitable.

These 2 penalties, IMHO, are put in there on the 'reward' side, to weed out folks who don't like to owe money, because they are perceived as less profitable potential customers.

Re: FICO Scoring Craziness

Thomas_Thumb — Thu, 29 Jun 2023 17:33:11 GMT

@Junejer wrote:
I was debating whether or not to start a thread on this subject and was mostly convinced not to until I just got a scoring update from EQ +2 to 840 for no apparent reason (not looking the gift horse in the mouth, by the way).

New account is my BoA car loan at 9 months. AAoA is 7yrs7mos. Not ancient and not young either. Oldest account 15yrs7mos.

I guess they're going to hold Genesis Finance against me for the next 10 years. Not going to turn down 2.99% plus all kinds of other rebates. Something really needs to be done about considering these types of loans to be CFAs.

Seeking credit. I have one INQ on EQ from August. I initially wanted to go through PenFed for the loan, but 5%+ was the going rate at that time. I chose the lower rate option.

Accounts with balances. I have an AU account showing a balance of $10 and three CCs showing balances of $41. $92 and $298. I have noticed that EQ is quite a bit more sensitive to AZEO than EX is. EX is non-plused when I report up to AZE4. In a few days, I will report AZEO with a balance of just $41. I'll see what happens to the score then. I'm on a quest to get to 850, but don't think I will ever get there with Genesis Finance showing.

Amen to EX and their insensitivity to # of cards with balances. EQ, particularly their score 5 version, has a strong bias toward fewer is better mentality.

Fico 8 and Fico 9 don't require flawless files to get 850. A CFA won't prevent reaching that objective by itself. You just need to have near flawless execution on other scoring elements. Fortunately you have an open installment loan.

The new loan is likely triggering the short credit history reason statement - It needs to age. First, get the account above 12 months then further age it to 3 years to show a sustained installment loan payment history.

Now is the time to stop seeking new credit and age your most recent inquiry and account both past 12 months. Practicing AZE1 should help move you closer to 850 - just remember it is always better to report AZE2 than AZ.

If you don't need the AU card, consider having it canceled and removed from your file. Then you won't have to worry about the AU $0 penalty.

Re: FICO Scoring Craziness

GApeachy — Thu, 29 Jun 2023 15:21:28 GMT

@SouthJamaica wrote:
There are various fields in the credit report which indicate that you have used your credit during the month

Neither FNBO nor GoodSam (Comenity) reflect my pymt this month. Doesn't indicate I used their credit. I paid off both cards before due date and nowhere are the pymts reflected in my Exp credit report.....and I believe therein lies the problem.

Perhaps not all cra's report the exact same way....perhaps that's why FICO scores the way it does.

You can have a higher fico when you're consistently borrowing & paying than the person with many tl's amounting to a lot of unused available credit.

Which in my case looks like I didn't use credit for June on those two cards plus one au card (Lowe's).

Re: FICO Scoring Craziness

SouthJamaica — Thu, 29 Jun 2023 15:18:42 GMT

@GApeachy wrote:
@SouthJamaica wrote:
There are various fields in the credit report which indicate that you have used your credit during the month
Neither FNBO nor GoodSam (Comenity) reflect my pymt this month. Doesn't indicate I used their credit. I paid off both cards before due date and nowhere are the pymts reflected in my Exp credit report.....and I believe there lies the problem.

Perhaps not all cra's report the exact same way....perhaps that's why FICO scores the way it does.
You can have a higher fico when you're consistently borrowing & paying than the person with many tl's amounting to a lot of unused available credit.
Which in my case looks like I didn't use credit for June on those two cards plus one au card (Lowe's).

I disagree. I rarely look at the full printed hard copy reports, but when I did, I saw that there were 3 or 4 fields for each account from which you could determine that there had been activity in that cycle.

Re: FICO Scoring Craziness

Thomas_Thumb — Thu, 29 Jun 2023 18:22:53 GMT

@Junejer wrote:
Nice try and understand your thinking. I am giving them something to score. I have "x amount" of credit available in my denomenator and am using my credit wisely by paying it off in full each month (without the games). And, they still score your report with $0/X, they just decide to ding you for it and then tell us that $1/X makes me that much more of a better credit risk.

I'd illustrate the gymnastics analogy a little differently relative to the so called AZ penalty.

Let's say a competitor's score for the balance beam event (Fico score category) is based on execution of 6 manditory +2 optional elements in the gymnast's routine.

Side note: the gymnast's score for the competition (Fico 8 score) is based on combined total of 4 events - beam, floor, bars and vault.

What is the "no recent revolving activity penalty" like? I say it is like successfully completing a stumble free sequence (no elevated utilization) across the balance beam but leaving out the spin (recent revolving activity). Balance beam event => amounts owed category, pass sequence => credit cards, spin => revolving utilization.

Lack of revolving activity (no spin) means management of revolving credit (the spin) could not be properly evaluated. It is unknown if the gymnast (credit user) would have stumbled (reported sub optimal utilization) if the spin (a revolving balance) were completed (reported).

Now let's say another, less accomplished, gymnast performs the same sequence during their routinr but includes the spin. There is no fall (high aggregate utilization) but a slight wobble on the spin was noted (32% utilization on a card). Which gymnast would have the lesser penalty?

No doubt, the athlete (revolving credit holder) that demonstrated (showed) the spin (revolving activity). If, on the other hand, the athlete fell (maxed out card or failed to pay balance) while executing the spin (showing card use) the score penalty could be more severe than a no recent use penalty.

Re: FICO Scoring Craziness

Zoostation1 — Fri, 30 Jun 2023 00:39:40 GMT

@GApeachy wrote:
@SouthJamaica wrote:
There are various fields in the credit report which indicate that you have used your credit during the month
Neither FNBO nor GoodSam (Comenity) reflect my pymt this month. Doesn't indicate I used their credit. I paid off both cards before due date and nowhere are the pymts reflected in my Exp credit report.....and I believe therein lies the problem.

Perhaps not all cra's report the exact same way....perhaps that's why FICO scores the way it does.
You can have a higher fico when you're consistently borrowing & paying than the person with many tl's amounting to a lot of unused available credit.
Which in my case looks like I didn't use credit for June on those two cards plus one au card (Lowe's).

I can't speak for FNBO or Comenity, but all of my cards (Discover, Cap One, Amex) even when reporting zero still show activity. There's always a last payment date that's from the most recently reported cycle regardless of whether tha balance reported is zero. IMO the solution to the inherent flaw in FICO scoring is that all lenbers that report a revolver to the CRAs should be REQUIRED to show a last activity date. Additionally there needs to be a separate category for cards reporting zero with activity and cards reporting zero without activity. Only giving an all zero penalty if all cards are in the latter. I have a better chance of winning the lottery than this actually being implemented but IMO it is the solution.

Re: FICO Scoring Craziness

GApeachy — Fri, 30 Jun 2023 01:13:12 GMT

@Zoostation1 wrote:
@GApeachy wrote:
@SouthJamaica wrote:
There are various fields in the credit report which indicate that you have used your credit during the month
Neither FNBO nor GoodSam (Comenity) reflect my pymt this month. Doesn't indicate I used their credit. I paid off both cards before due date and nowhere are the pymts reflected in my Exp credit report.....and I believe therein lies the problem.

Perhaps not all cra's report the exact same way....perhaps that's why FICO scores the way it does.
You can have a higher fico when you're consistently borrowing & paying than the person with many tl's amounting to a lot of unused available credit.
Which in my case looks like I didn't use credit for June on those two cards plus one au card (Lowe's).

I can't speak for FNBO or Comenity, but all of my cards (Discover, Cap One, Amex) even when reporting zero still show activity. There's always a last payment date that's from the most recently reported cycle regardless of whether tha balance reported is zero. IMO the solution to the inherent flaw in FICO scoring is that all lenbers that report a revolver to the CRAs should be REQUIRED to show a last activity date. Additionally there needs to be a separate category for cards reporting zero with activity and cards reporting zero without activity. Only giving an all zero penalty if all cards are in the latter. I have a better chance of winning the lottery than this actually being implemented but IMO it is the solution.

Im talking about the actual pymt. The dollar amount. Equifax shows the actual dollar amount. Exp and TransUnion do not. All cra's show pymt date.....but only one, Equifax, shows $ amt. Instead of $0.

In this instance I'm referring to is Lowes. I pd off Lowe's on 6/05/2023 $201 and that $201 dollar amt. is only reported on Equifax. Exp & Tu show $0. Weird.

Re: FICO Scoring Craziness

Brian_Earl_Spilner — Fri, 30 Jun 2023 01:15:16 GMT

What about this, and hear me out...all zero isn't a penalty. It's a baseline and everything else is a penalty or bonus. Use just the right amount of UTI and get a scoring bonus. Use the wrong amount and you get penalties.

Re: FICO Scoring Craziness

GApeachy — Fri, 30 Jun 2023 01:27:02 GMT

@Brian_Earl_Spilner wrote:
What about this, and hear me out...all zero isn't a penalty. It's a baseline and everything else is a penalty or bonus. Use just the right amount of UTI and get a scoring bonus. Use the wrong amount and you get penalties.

That'll work

Re: FICO Scoring Craziness

Thomas_Thumb — Fri, 30 Jun 2023 12:55:55 GMT

@Brian_Earl_Spilner wrote:
What about this, and hear me out...all zero isn't a penalty. It's a baseline and everything else is a penalty or bonus. Use just the right amount of UTI and get a scoring bonus. Use the wrong amount and you get penalties.

That's not how Fico works. If there is no revolving credit use their data shows elevated risk over some use. I have no issue with that as a metric.

[If a person has been inactive at something for a while, such as a sport or playing cards, that person is more likely to underperform when restarting the activity than if there had been steady use].

The problem is Fico's method for determining activity is flawed. It ignores use on certain cards with non zero balances. Furthermore, a zero balance is not a robust identifier of revolving account activity in an age where people payoff charges before statements cut.

I don't pre-pay and therefore don't have reason to whine about Fico's methodology for determining recent activity.

However, there is a related attribute that impacts me. So, I whine about Fico's approach for evaluating it instead. Namely, revolving utilization and number of cards reporting balances.

I am a transactor. I pay all charges in full every month just like most AZEO players. However, I pay accumulated charges after statement cut date, not before. As a result, statements often show non trivial balances.

Pay after cut date transactors get punished for not hiding credit use. How is that more risky than pay before cut date transactors. In either case the same amount of monthly charges run thru the account(s) and are paid off. The increase in risk comes when balances are carried over as in revolver behavior.

I thought Fico 10T would detect transactor behavior and adjust algorithm scoring factors accordingly. This was not done.

Why not? Perhaps pay after cut date transactors are bad for business and such behavior should be discouraged. More likely, detecting transactor behavior is too much effort and non value add to Fico's primary customers -our creditors.

Enough whine. Better stop now.

Re: FICO Scoring Craziness

Junejer — Mon, 03 Jul 2023 23:26:43 GMT

@SouthJamaica wrote:
Reporting a zero balance does not indicate you are not using your credit. There are various fields in the credit report which indicate that you have used your credit during the month.

Neither the all zero penalty in revolving credit nor the no open loan penalty in installment credit make any sense from a risk avoidance standpoint, which is supposedly the reason for FICO scores. Having paid off all of one's loans, and having paid off all of one's credit cards, makes the borrower less risky, not more risky.

I have a hunch that FICO is not just about risk, it's also about reward. It attempts to locate the more profitable potential customers, and weed out the less profitable.

These 2 penalties, IMHO, are put in there on the 'reward' side, to weed out folks who don't like to owe money, because they are perceived as less profitable potential customers.

Bingo! Neither of these penalties make me a credit risk. I know how to play the game, so I do it...for now. Thus, I am carrying a balance of $101 on my car loan for credit mix. I allow a small balance to report on a CC to prevent an AZ penalty. It's a game and they make up (and change) the rules to benefit their pocket books.

Re: FICO Scoring Craziness

Anonymalous — Tue, 04 Jul 2023 12:44:50 GMT

@Thomas_Thumb wrote:
Pay after cut date transactors get punished for not hiding credit use. How is that more risky than pay before cut date transactors. In either case the same amount of monthly charges run thru the account(s) and are paid off. The increase in risk comes when balances are carried over as in revolver behavior.

I thought Fico 10T would detect transactor behavior and adjust algorithm scoring factors accordingly. This was not done.

Why not? Perhaps pay after cut date transactors are bad for business and such behavior should be discouraged. More likely, detecting transactor behavior is too much effort and non value add to Fico's primary customers -our creditors.

Enough whine. Better stop now.

Trending tries to capture that, to some degree. The problem seems to be in the data. The information reported to the bureaus by the lenders is an instant in time, and doesn't show the constant ebb and flow of balances during the entire billing cycle. The fields that do capture some in between activity, like max balance, don't really show the whole picture. Since transactions have become available online and are no longer just mailed once a month, and payments can be both automated and done quickly, it's become feasible for end customers to game the system, and the data collection hasn't adapted. That's probably because getting all the lenders to update the information they report is a bigger task than just updating the scoring model, or as you pointed out it's simply not worth the effort, so they've developed a system that tries to infer in-between behavior based on an incomplete data set.

Re: FICO Scoring Craziness

Junejer — Tue, 04 Jul 2023 13:02:31 GMT

@Thomas_Thumb wrote:
@Brian_Earl_Spilner wrote:
What about this, and hear me out...all zero isn't a penalty. It's a baseline and everything else is a penalty or bonus. Use just the right amount of UTI and get a scoring bonus. Use the wrong amount and you get penalties.
That's not how Fico works. If there is no revolving credit use their data shows elevated risk over some use. I have no issue with that as a metric.

[If a person has been inactive at something for a while, such as a sport or playing cards, that person is more likely to underperform when restarting the activity than if there had been steady use].

The problem is Fico's method for determining activity is flawed. It ignores use on certain cards with non zero balances. Furthermore, a zero balance is not a robust identifier of revolving account activity in an age where people payoff charges before statements cut.

I don't pre-pay and therefore don't have reason to whine about Fico's methodology for determining recent activity.

However, there is a related attribute that impacts me. So, I whine about Fico's approach for evaluating it instead. Namely, revolving utilization and number of cards reporting balances.

I am a transactor. I pay all charges in full every month just like most AZEO players. However, I pay accumulated charges after statement cut date, not before. As a result, statements often show non trivial balances.

Pay after cut date transactors get punished for not hiding credit use. How is that more risky than pay before cut date transactors. In either case the same amount of monthly charges run thru the account(s) and are paid off. The increase in risk comes when balances are carried over as in revolver behavior.

I thought Fico 10T would detect transactor behavior and adjust algorithm scoring factors accordingly. This was not done.

Why not? Perhaps pay after cut date transactors are bad for business and such behavior should be discouraged. More likely, detecting transactor behavior is too much effort and non value add to Fico's primary customers -our creditors.

Enough whine. Better stop now.

Generally speaking, I have no issue with that as a metric either. However, there needs to be a meaningful dollar amount or percentage of credit utilization to measure that metric. I don't believe for one minute that they have done all this research and concluded that a person who allows $1 to report is far less a credit risk than the person who allows $0 to report. This is pure FICO foolishness. It's the model and my ranting isn't going to change it. I'm just sick of reading that I (and anyone who plays the FICO game) is less of a credit risk than the AZ guy purely based on that metric.

Re: FICO Scoring Craziness

Thomas_Thumb — Tue, 04 Jul 2023 17:05:41 GMT

Score is being penalized for "lack of recent revolving activity". It is not an all zero penalty. In fact, I received that penalty even when balances over $1000 reported on my AMEX and an AU credit card. The AU card and AMEX charge are ignored by Fico in the revolving use metric.

Again, the penalty is "lack of recent revolving activity". Fico does not have an all zeros penalty. They just happen to use a zero balance as an antiquated method for signalling a revolving account was not used.

If card issuers were required to report total charges during a month as well as total payments, then more robust methods could be used to ascertain activity. Many card issuers don't want the added hassle/expense or reporting that data. So, zero balance remains as the indicator.

Re: FICO Scoring Craziness

NYC_Fella — Tue, 04 Jul 2023 15:11:05 GMT

@Junejer wrote:Thus, I am carrying a balance of $101 on my car loan for credit mix.

Curious; how do you do that?