topic Re: Does the FICO score have a memory? in Understanding FICO® Scoring

Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 02:58:21 GMT

I was wondering if the score formula takes a real history into account. Or is it only calculated based on todays snapshot?
Let's assume I have 1% util. for 1 year. That means every month the same utilization is reported to the bureaus.
The 2nd scenario could be this one: 11 month 50 % util, payed down to 1% in month 12.
Now, if the score is calculated only based on month 12, the score should be equal.
Is this really the case? Does anybody know if this is true?
The CR shows ballances of the last x month, so it is possible that this is used.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 03:13:47 GMT

Your credit report does store some history but pretty much what you see with a few exceptions. The score is only a snapshot based on current reports.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 03:31:33 GMT

If it's only the snapshot, why do people keep this low utilization and pay before the payment cuts? Paying after the payment cuts (and before the payment is due) gives a ~20 day interest free credit (while, on the other side, I get interest at my bank). Of couse that is bad for the CCC, and thus, receives the score penalty that we know.

Message Edited by Physicist on 09-08-2008 10:31 PM

Re: Does the FICO score have a memory?

haulingthescoreup — Tue, 09 Sep 2008 03:59:24 GMT

I don't think that the motivation is to make people pay early, because believe me, no one is aware of this. I'll bet they would have found a way to get the word out if they wanted.

I worked out the interest once, and it was a couple of cents per account. I do it because it's as easy for me to pay early as to pay after the statement posts, and it gives me that much more insulation before risking a late. Also, even though util is easier to turn around than other factors, there is still at least a 30-day lag if you suddenly need the score increase, and that's not counting oddly-reporting cards and the horrendous pokiness of the CRA's.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 10:44:37 GMT

Most people don't pay early nor do most people need to unless they are utilizing a large percentage of their available credit lines. Those people stand to benefit by paying early and thus boosting their scores. The one time it truly pays to worry about paying before the statement cuts is when you are applying for a loan. Tweaking with util percentage and the number of accounts reporting balances could gain you 20-30 crucial points and put you in a different interest rate tier. At all other times, if your scores are not borderline and would not cause credit card companies any worry, you have no real need to worry as long as your utility is under 20 percent and you don't have any maxed out cards.

Physicist wrote:
If it's only the snapshot, why do people keep this low utilization and pay before the payment cuts? Paying after the payment cuts (and before the payment is due) gives a ~20 day interest free credit (while, on the other side, I get interest at my bank). Of couse that is bad for the CCC, and thus, receives the score penalty that we know.

Message Edited by Physicist on 09-08-2008 10:31 PM

Re: Does the FICO score have a memory?

mrlimo — Tue, 09 Sep 2008 12:08:52 GMT

I payed in full before the cut date for a few months playing around with what senerio worked best for my situation. If I need to bump up the score for an app I know hands on what I need to do and how it is effected.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 15:34:57 GMT

So do you think FICO scores you better if you have under 10% util. for say, 6 consecutive months as opposed to 4 months low util, then 1 month 29%, then back down to below 10% for the 6th month? Would the score be the same after than sixth month either way?

Re: Does the FICO score have a memory?

haulingthescoreup — Tue, 09 Sep 2008 15:50:10 GMT

@Anonymous wrote:

So do you think FICO scores you better if you have under 10% util. for say, 6 consecutive months as opposed to 4 months low util, then 1 month 29%, then back down to below 10% for the 6th month? Would the score be the same after than sixth month either way?

In the second scenario, your scores would drop in that one higher-util month, but in the sixth month, if your util is where it would have been without the bump, the scores should be identical.

When you use the sims to project your scores over differing time periods, the language makes it look like there's some sort of benefit for dragging out payments, but there isn't. That scenario is just combining the effects of util and X number additional months of clean history. When it comes to util, it's just what is showing on your reports that very moment.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 17:00:28 GMT

I believe with revolving UTL FICO only looks to see last payment and current balance. I believe what you did 2 payments back is not read as long as there are no negative actions.

I PIF on due date because when I PIF early I can't keep track of what's going with statements. They say I owe money then I pay more and end up with a credit, then some how it turns in to a balance and I get lost. Paying after it goes to statement works best for me. I will go through the trouble of PIF before statement only when I need my scores up.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 18:03:30 GMT

@haulingthescoreup wrote:
I don't think that the motivation is to make people pay early, because believe me, no one is aware of this. I'll bet they would have found a way to get the word out if they wanted.

I worked out the interest once, and it was a couple of cents per account.

Yes, a couple of cents for you, but a big chunk for the CCC, because they have more than only your account.

Re: Does the FICO score have a memory?

Anonymous — Tue, 09 Sep 2008 19:03:10 GMT

Your score in month 12 will not be the same as in month 1. If, for no other reason, all your accounts have aged 1 year.

I believe (but can't prove it) FICO score does not have a memory. Your score is nonexistent - you don't have a score - until such time as you request a copy of your report and you pay for it. FICO calculates your score at the moment you pay for it. If you pay for your score at 10:00 AM Monday morning, that is your score as of 10:00 AM Monday morning. It is possible that if you pay for a score again at 2:00 PM on that same Monday, your score would be different.

Re: Does the FICO score have a memory?

haulingthescoreup — Tue, 09 Sep 2008 23:26:20 GMT

@Anonymous wrote:
@haulingthescoreup wrote:
I don't think that the motivation is to make people pay early, because believe me, no one is aware of this. I'll bet they would have found a way to get the word out if they wanted.

I worked out the interest once, and it was a couple of cents per account.

Yes, a couple of cents for you, but a big chunk for the CCC, because they have more than only your account.

I do understand that, but I don't mind if it helps their bottom line. It's not appreciably hurting mine, and it works for my in a lot of ways.

Paying early isn't for everyone, but it's not a ridiculous thing to do, or a puppet-like response to the CCC's and the CRA's. Certainly it has sharpened my attention toward my credit to a knife-point, and since my past problems resulted from carelessness, that's an improvement for me.

Re: Does the FICO score have a memory?

Anonymous — Wed, 10 Sep 2008 00:47:17 GMT

I was a denied a new CC due to my payment history over the past 6 months. At the time, my score was high and utility was very low, but I had just paid everthing off after carrying balances for sometime. So while it didn't affect my score, it did affect a decision to give me credit.

Re: Does the FICO score have a memory?

Anonymous — Wed, 10 Sep 2008 02:22:29 GMT

@Anonymous wrote:
I was a denied a new CC due to my payment history over the past 6 months. At the time, my score was high and utility was very low, but I had just paid everthing off after carrying balances for sometime. So while it didn't affect my score, it did affect a decision to give me credit.

Was that what was stated in the denial letter or is this your assumption?

Re: Does the FICO score have a memory?

RobertEG — Wed, 10 Sep 2008 03:01:32 GMT

I agree with Cian as to a manual review. Once the current accout balance is updated by the OC and entered into the CR by the CRA, then FICO scoring is based only on the current %util of each reported account. It is thus a "current snapshot" only, once entered in the file.

However, your complete credit file does store prior monthly account balances for a period of time, so if a potential creditor does a manual review of your file, they may choose to consider more than just your current FICO score in making a credit decision. FICO score is not the end-all in creditor decisions.

Re: Does the FICO score have a memory?

Anonymous — Wed, 10 Sep 2008 14:31:10 GMT

I was denied a Citizen's Bank Mastercard, based on my payment history over the last 6 months (that was in the denial letter and the reason for denial). I'm sure they saw that I carried a high balance on all my cards for the last 6 months.