topic Re: All zero penalty 22 points in Understanding FICO® Scoring

All zero penalty 22 points

SouthJamaica — Fri, 19 Apr 2024 14:38:32 GMT

In a somewhat thin, moderately aged, profile I'm monitoring for a friend, the All Zero penalty just cost 22 points in EX FICO 8.

I guess this is becoming so well documented that it doesn't count as news, but I just thought I'd throw it into the hopper.

And I might also add that I think it is a ridiculous feature of the FICO algorithms

Re: All zero penalty 22 points

TheKid2 — Fri, 19 Apr 2024 14:53:23 GMT

To me the all zero penalty, which as you state has been well documented here, isn't about credit worthiness at all. It's a flag to a creditor that says "you ain't makin money off me because I don't carry balances". I suspect it was put into the algos for that simple reason.

All things being equal on the derogatory side, as a creditor I want to lend to someone who will carry some balances and paying some interest over someone who pays everything off every month.

In the end, this penalty is easily defeated next month.

Re: All zero penalty 22 points

FicoMike0 — Fri, 19 Apr 2024 15:05:52 GMT

Thanks for the effort, more data is always good.

You may have started another "I think the algorithm is wack" thread. I wonder if this effect shows up in 10t? It seems likely to me that it's an artifact of the " snapshot" nature of the algorithm. Once an algorithm (10t) is keeping track over time, this might go away.

Re: All zero penalty 22 points

Horseshoez — Fri, 19 Apr 2024 15:12:56 GMT

@FicoMike0 wrote:
Thanks for the effort, more data is always good.
You may have started another "I think the algorithm is wack" thread. I wonder if this effect shows up in 10t? It seems likely to me that it's an artifact of the " snapshot" nature of the algorithm. Once an algorithm (10t) is keeping track over time, this might go away.

In March I took a 16 point whack in my FICO 8 scores due to the dreaded AZ penalty (I wasn't able to see my FICO 10T scores as the point loss and rebound happened between reports); in April my FICO 8 scores rebounded (plus an extra point on Equifax). I just looked at my FICO 10T scores for March and April and see the following:

EQ: 811 --> 812
EX: 817 --> 822
TU: 805 --> 804

Re: All zero penalty 22 points

keekers — Fri, 19 Apr 2024 19:59:49 GMT

Lame. Thanks for sharing.

Re: All zero penalty 22 points

SouthJamaica — Fri, 19 Apr 2024 22:40:48 GMT

@TheKid2 wrote:
To me the all zero penalty, which as you state has been well documented here, isn't about credit worthiness at all. It's a flag to a creditor that says "you ain't makin money off me because I don't carry balances". I suspect it was put into the algos for that simple reason.

Agreed. But FICO doesn't admit that

All things being equal on the derogatory side, as a creditor I want to lend to someone who will carry some balances and paying some interest over someone who pays everything off every month.

In the end, this penalty is easily defeated next month.

Re: All zero penalty 22 points

FicoMike0 — Fri, 19 Apr 2024 23:35:22 GMT

@Horseshoez

So, no effect on 10T?

Btw where do you get 10T?

Re: All zero penalty 22 points

Horseshoez — Sat, 20 Apr 2024 02:25:25 GMT

@FicoMike0 wrote:
@Horseshoez
So, no effect on 10T?
Btw where do you get 10T?

I get my scores once per month via the myFICO Premier package, typically a day either side of the 6th; given my AZ penalty whacked my scores last month on th 8th and then recovered on something like the 22nd, I never saw the snapshot view while my scores were depressed to be able to determine if 10T takes a hit or not.

Re: All zero penalty 22 points

CorpCrMgr1 — Sat, 20 Apr 2024 02:57:17 GMT

I have chosen not to pay interest. My score generally doesn't drop.

Re: All zero penalty 22 points

Horseshoez — Sat, 20 Apr 2024 03:00:30 GMT

@CorpCrMgr1 wrote:
I have chosen not to pay interest. My score generally doesn't drop.

I don't pay interest either, but when all accounts are zero, your score will drop.

Re: All zero penalty 22 points

Zoostation1 — Sat, 20 Apr 2024 05:13:06 GMT

I will agree with much of what has already been said, and add that while score changes due to utilization are muted on dirty profiles like mine when compared to clean profiles, the EX AZ penalty is still 22pts. It's what I've experience for brief period of AZ when changing what card reports for AZEO. That being said, I doubt I'll ever do AZEO again until I'm in a situation where I can get a mortgage and need to maximize points. Since goign to AZE2 (2/5 cards reporting) I've had no significant changes and now that I have 6 cards I may end up 3/6 ocasionally. It's just not worth the effort and is so much easier to let balances report naturally (at least for the cards I use regulalry).

Re: All zero penalty 22 points

SouthJamaica — Tue, 21 May 2024 17:59:57 GMT

Update.

Today a balance reported in the account, and EX FICO 8 increased by -- you guessed it -- the same 22 points.

So the all zero penalty for this profile is 22 points.

Re: All zero penalty 22 points

Thomas_Thumb — Tue, 21 May 2024 18:11:27 GMT

Sounds like you are talking about Zoostation1

Re: All zero penalty 22 points

SouthJamaica — Tue, 21 May 2024 20:15:03 GMT

@Thomas_Thumb wrote:
Sounds like you are talking about Zoostation1

Re: All zero penalty 22 points

markbeiser — Wed, 22 May 2024 00:19:56 GMT

Bad debt slave, you can't just go around not owing banks money!🤪

Re: All zero penalty 22 points

FicoMike0 — Wed, 22 May 2024 00:40:12 GMT

To me, it's strange that fico has gotten by this long using the " snapshot" approach to utilization. It was pointed out on another thread that the historic data is already available on the reports.

I generally allow two accounts to report nonzero. Now that I have 7 accounts, I suppose I could go aze3. it's handy from a cash flow standpoint to be able to pay after posting.

Re: All zero penalty 22 points

TheKid2 — Wed, 22 May 2024 03:06:36 GMT

@FicoMike0 wrote:
To me, it's strange that fico has gotten by this long using the " snapshot" approach to utilization. It was pointed out on another thread that the historic data is already available on the reports.

FICO has lots of products, some of which do look at utilization trends. It takes time for lenders to move to more moden scoring models because they have a long established history with the older models to define risk. Look how old the mortgage models are compared to the 8 models. Moving to the 10+ models represent additional risk for them.

Re: All zero penalty 22 points

Pppoolboy — Tue, 18 Jun 2024 05:00:46 GMT

Nah the "all-zero penalty" is the same as the "installment loan payoff penalty." It's because you are no longer able to be monitored. When you have one or more open loans (revolving and/or installment) which you are consistently paying down each month, your (hopefully good) behavior can be monitored. If you have no accounts consistently reporting your behavior, you are, ipso facto, riskier. Someone else on this forum (Bucky?) pointed that out 6 or 8 months ago and he was right.

Think of it like the differences between two jail cells -- one with a camera inside it that takes a photo and displays it on a guard's screen every 5 minutes and one without any camera. If you were a guard, would you feel more comfortable with the cell that has the camera, where the inmate's behavior is known to you on a reasonably consistent basis, or the one without the camera where the inmate's behavior is totally unknown? Which cell would you worry more about? If an inmate's behavior can be consistently monitored, he's less of a risk.

When you have payments being reported every month, your behavior is (at least somewhat) known. Once you pay those loans off and nothing is reporting, your behavior is totally unknown, hence riskier, hence the score drop.

Re: All zero penalty 22 points

Horseshoez — Tue, 18 Jun 2024 05:35:25 GMT

@Pppoolboy, I'm not sure where you're getting your information, but it is highly flawed.

Re: All zero penalty 22 points

SouthJamaica — Tue, 18 Jun 2024 14:55:53 GMT

That is simply not true @Pppoolboy

Regardless of what your reported balance is, the reports indicate what your history is, both long term and for the current reported month.