topic Re: VERY interesting info about FICO score points in Understanding FICO® Scoring

VERY interesting info about FICO score points

jello77 — Sat, 04 Feb 2012 14:08:53 GMT

This board is full of posts and speculation about how many points your FICO score might change when certain items in your credit report changes.

But it's rare to find FICO itself offering illustrations of this.

Below is a chart produced by FICO giving hypothetical examples of how score points can vary based on changes in the five main categories that affect your score.

The chart is dated 2010 (in bottom left corner), so the information is quite recent.

Here are some highlights from the chart:

Outstanding Debt

The chart shows maximum score points when "Average balance on revolving trades" is between $1 and $99. This confirms what numerous posters on this board have found, that their score was highest when one credit card reported a balance that was small but greater than 0.

Pursuit of New Credit

For hard inquiries in the last 6 months, the chart shows a loss of 10 points for 1 inquiry, 15 points for a 2nd inquiry, 20 points for a 3rd inquiry, and 5 points for a 4th inquiry.

Credit Mix

The chart shows maximum score points being received with 3 credit cards. A 4th card causes a loss of 10 points.

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This chart is obviously intended to give a general, hypothetical idea of how different factors can affect the FICO score. The actual change in score points for a real person will depend on numerous factors such as which "scorecard" or "bucket" you are on.

What do you think of this chart?

How does it match with your experience?

Does it have any practical value for us FICO junkies?

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EDITED TO ADD THIS:

On the same FICO document that contained the chart I posted above, I found another interesting illustration of score point changes.

Number of months

since most recent

bankcard opening______Points

____0 to 5_____________20

____6 to 11____________25

____12 to 17___________30

____18 to 23___________38

____24+ ______________45

What this tells us:

If all of your cards are more than 2 years old, and you then get a new card, you might have a 25 point decline in your score. This decline would gradually "wear off" until it is all gone after 24 months.

This is useful information I did not know previously. I thought the "ding" caused by a new card probably wore off after 12 months.

Re: VERY interesting info about FICO score points

ztnjpv — Fri, 03 Feb 2012 18:30:20 GMT

I have never asked but I suspected that little feature about not having a zero balance. At Credit Karma, my utlization is graded "C" because the report they have has 2 cards with a zero balance and one with a $53 balance on a $9,700 limit. It made no sense as I felt I was being penalized for paying off the cards every month before my statement posted.

It seems silly because I use both cards quite often and the usage is very visible on my statements....sometimes as much $600-700 in purchases in a monthly cycle. BUT, I pay the balance in full a few days before statement date so the balance is zero when it reports.

Re: VERY interesting info about FICO score points

jello77 — Mon, 06 Feb 2012 21:21:08 GMT

ztnjpv:

Some of the things Credit Karma says can be seriously misleading.

I follow the same practice as you, making payments before the statement date so that only one card reports a small balance. This has helped me maintain FICO scores consistently over 800. But Credit Karma grades my Utilization as C, which doesn't make any sense.

Credit Karma also gives a grade for TOTAL ACCOUNTS. I have 10 accounts and CK gives me a grade of C. To get an A, CK says you must have at least 22 accounts.

Of course, this is nonsense. I suspect CK grades this way to encourage people to apply for more cards. Why? Because the site is free to consumers and CK makes its money from promoting credit card offers.

Probably the worst feature of CK is its notorious "Score Simulator." The Simulator will say that if you cancel your oldest credit card, your score will go UP. This is crazy and very bad advice.

CK is useful for some things, but do not trust the "grades" it gives you.

Re: VERY interesting info about FICO score points

llecs — Fri, 03 Feb 2012 19:02:10 GMT

@jello77 wrote:

CK is useful for some things, but do not trust the "grades" it gives you.

...and don't trust their FAKO scores.

Re: VERY interesting info about FICO score points

ztnjpv — Fri, 03 Feb 2012 19:23:53 GMT

Thanks for the reply, Jello!

However, if that chart in the Original Post is to be believed, then it confirms the suspiscion many have that having your cards report a ZERO balance is less optimal than leaving a few bucks on the balance.

The end result is people can barely truly use credit...say, buying some candy every month and leaving a $2 balance...and get more rewarded than someone who demosrates an ability to use the credit more liberally and pay in full every month. That, to me, is just plain wrong. Oh well....

Re: VERY interesting info about FICO score points

MarineVietVet — Fri, 03 Feb 2012 19:43:44 GMT

@ztnjpv wrote:
Thanks for the reply, Jello!

However, if that chart in the Original Post is to be believed, then it confirms the suspiscion many have that having your cards report a ZERO balance is less optimal than leaving a few bucks on the balance.

The end result is people can barely truly use credit...say, buying some candy every month and leaving a $2 balance...and get more rewarded than someone who demosrates an ability to use the credit more liberally and pay in full every month. That, to me, is just plain wrong. Oh well....

Hi there.

Here is how you manage that $2 charge (or any amount) for the month. Let it report the $2 on the monthly statement and then pay in full before the due date and never carry a balance forward to the next month and thus never pay any interest.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Re: VERY interesting info about FICO score points

ztnjpv — Fri, 03 Feb 2012 22:05:13 GMT

MarineVet,

Paying my balance to ZERO every month is precisely what I do. However, it would seem I am being slightly penalized for it and it would be better for my score if I left a few bucks on balance. Truth be told, I have yet to pay a penny of interest on my 2 cards.

Re: VERY interesting info about FICO score points

MarineVietVet — Fri, 03 Feb 2012 22:58:34 GMT

@ztnjpv wrote:
MarineVet,

Paying my balance to ZERO every month is precisely what I do. However, it would seem I am being slightly penalized for it and it would be better for my score if I left a few bucks on balance. Truth be told, I have yet to pay a penny of interest on my 2 cards.

I think you might still be a little confused. You don't pay your balance to zero before the statement posts. That is what penalizes you on points. You let a small balance report and then pay in full. This tactic will show activity on your card and you won't be penalized in any way.

Re: VERY interesting info about FICO score points

RobertEG — Fri, 03 Feb 2012 23:46:06 GMT

The chart seems to be a bit at odds with the mantra that is often heard on the site.... that FICO primarily scores % util of CL, not balance of revolving debt.

Since the chart was published by Fair Isaac, and does not even mention % util of credit limit, I would suspect that the lesson to be learned is that balances are significant. Whether on a par with % util is not addressed, but it gives food for thought.... far beyond the relatively isolated issue of 0 balance vs some balance. It extends up the ladder.

It would be great if % util was also included in the chart, thus giving some idea of their relative importance.

Re: VERY interesting info about FICO score points

ztnjpv — Sat, 04 Feb 2012 00:53:59 GMT

Marinevet,

OK. I was a little confused.

On that note, I must have been misinformed in the past on this matter. I was led to believe that activity on your card....even if you pay in full before your statement date...is noticed by the credit bureaus. I guess not. That's too bad.

Re: VERY interesting info about FICO score points

ztnjpv — Sat, 04 Feb 2012 01:02:21 GMT

@RobertEG wrote:
The chart seems to be a bit at odds with the mantra that is often heard on the site.... that FICO primarily scores % util of CL, not balance of revolving debt.

Since the chart was published by Fair Isaac, and does not even mention % util of credit limit, I would suspect that the lesson to be learned is that balances are significant. Whether on a par with % util is not addressed, but it gives food for thought.... far beyond the relatively isolated issue of 0 balance vs some balance. It extends up the ladder.

It would be great if % util was also included in the chart, thus giving some idea of their relative importance.

Personally, I think it stinks that we should have to play around with this little minutiae to get better scores. I think the system should be better than that. It should be able process perfectly reasonable and plausible details and score accordingly without the consumer needing to change perfectly good credit behavior to teak out more points.

Re: VERY interesting info about FICO score points

jello77 — Sat, 04 Feb 2012 01:39:37 GMT

----------------------------------------------
RobertEG wrote:

The chart seems to be a bit at odds with the mantra that is often heard on the site.... that FICO primarily scores % util of CL, not balance of revolving debt.

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Here is my theory about what's going on with this chart.

Linked below is a FICO-sponsored page that describes in detail the 5 major categories that affect your score.

http://scoreinfo.org/FICO-Scores/Score-Ingredients.aspx

The page explains that each of the 5 major categories includes several different factors.

Regarding the "Amounts owed" category (which the chart calls "Outstanding Debt'), the page linked above shows this category includes these 6 factors:

(1) The amount owed on all accounts.

(2) The amount owed on different types of accounts.
______This is the factor listed in the chart as "Average balance on revolving accounts."

(3) Whether you are showing a balance on certain types of accounts.

(4) The number of accounts where you carry a balance.

(5) How much of the total credit line is being used on credit cards and other revolving credit accounts.
______This is commonly called "utilization."

(6) How much is still owed on installment loan accounts, compared with the original loan amounts

It appears to me that, for each of the 5 major categories, the chart has selected just one factor within each category to illustrate how changes in that particular factor affect your score.

Although the chart shows "Average balance on revolving accounts" and does NOT show utilization, I don't think this means revolving balances have any more importance relative to utilization than we have always assumed.

I don't think we can make any assumptions from this chart about the relative importance of any scoring factors WITHIN any of the 5 major categories.

That's how I would interpret this chart.

Re: VERY interesting info about FICO score points

RobertEG — Sat, 04 Feb 2012 02:16:48 GMT

+1 Good analysis.

But the selection of balances as a focus certainly indicates its significance.... unless it is just a curveball to confuse the details of their algorithm...

It does not, of course, say that balances are on a par, but it certainly signifies, a least to me, that they are scored to a higher weight than I previously assumed.

Similar thoughts are raised by the apparent par of no inquires with no public records or a 4 year credit history.

The chart raises more questions in my mind than it answers. Perhaps that was its intent.....

Re: VERY interesting info about FICO score points

AndySoCal — Sat, 04 Feb 2012 04:14:39 GMT

I have a paper copy of this chart you posted. I have had this for 10 years or so. An interesting question is if you have a store card that is a co-branded card this a VISA or AMEX is that considered a bankcard or not? If you found this chart on the can you pos the link? Thanks for this post

Re: VERY interesting info about FICO score points

jello77 — Sat, 04 Feb 2012 05:02:00 GMT

Andy,

Regarding whether a store card that is co-branded with Visa or Amex is considered a bankcard, my guess would be yes provided you can use it anywhere Visa or Amex is accepted. But I'm not really sure what FICO's definition of bankcard is.

Sorry, but I don't have a web link to the chart. I scanned it from a paper document. An employee at our company got the document when he attended a FICO presentation at a conference in 2010.

The document has one more interesting chart that I will post in a separate thread after I have a chance to scan it. It has to do with how your FICO score influences how many of those pre-approved credit card offers you receive in the mail. The result is not quite what you might expect.

Re: VERY interesting info about FICO score points

jello77 — Sat, 04 Feb 2012 06:30:54 GMT

On the same FICO document that contained the chart I posted above, I found another interesting illustration of score point changes.

I added the info to my original post.

Re: VERY interesting info about FICO score points

CS800 — Sat, 04 Feb 2012 23:34:05 GMT

@llecs wrote:
@jello77 wrote:

CK is useful for some things, but do not trust the "grades" it gives you.

...and don't trust their FAKO scores.

Re: VERY interesting info about FICO score points

smallfry — Thu, 19 Apr 2012 21:12:55 GMT

@RobertEG wrote:
The chart seems to be a bit at odds with the mantra that is often heard on the site.... that FICO primarily scores % util of CL, not balance of revolving debt.

Since the chart was published by Fair Isaac, and does not even mention % util of credit limit, I would suspect that the lesson to be learned is that balances are significant. Whether on a par with % util is not addressed, but it gives food for thought.... far beyond the relatively isolated issue of 0 balance vs some balance. It extends up the ladder.

It would be great if % util was also included in the chart, thus giving some idea of their relative importance.

If you look at the Fico Estimator you will notice that it asks how much your balances are on all revolving credit. We might only be talking about a ten point score difference between under $500 owed to $5000 owed. My EX FICO from PSECU is currently 825 with over 5K owed. I'll see if it goes up once the balances are close to 0 in a few months.

Re: VERY interesting info about FICO score points

MattH — Mon, 23 Apr 2012 03:00:22 GMT

I believe each of the big three CRAs gives different relative weights to the revolving-credit data. Based on my experience when we could pull all three here, I concluded that for a long-and-clean file like mine, EX emphasized percent utilization more, TU emphasized number of accounts with balances, and EQ emphasized total balance mode. I have thought for a long time instead of statement balance it would make more sense to require every credit card card report HOW MUCH DEBT IF ANY IS CARRIED OVER INTO THE NEXT BILLING PERIOD, as that is what distinguishes convenience users like me from revolvers: I might run up hefty balances during a month in which I spend a lot, but I will pay it in full because I do not currently pay interest on non-mortgage debts.

Re: VERY interesting info about FICO score points

marty56 — Mon, 23 Apr 2012 19:25:24 GMT

@MattH wrote:
I believe each of the big three CRAs gives different relative weights to the revolving-credit data. Based on my experience when we could pull all three here, I concluded that for a long-and-clean file like mine, EX emphasized percent utilization more, TU emphasized number of accounts with balances, and EQ emphasized total balance mode

I also noticed this with my long-unclean file was well and now that EQ is clean, the effect seems more pronounced.