topic Re: "high balance" and FICO 8 in Understanding FICO® Scoring

"high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 00:44:11 GMT

I ran across the following passage today. It's from FICO, explaining the ways that FICO 8 differs from other FICO models:

High credit card usage

While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.

Keeping credit card balance low can help maintain or improve the score.

http://www.myfico.com/crediteducation/fico-score-8.aspx

The thing that struck me is that they deliberately use the term "high balance." (Emphasis mine in the quote.) That's a "term of art" -- it refers to a very specific field on your credit report. It means "the highest balance this card has ever reported." It does not mean "your current balance which is pretty darn high."

Note that, if they meant your current balance, they could have easily omitted the word "high": i.e. "if a credit report shows a balance close to the card's limit...."

Now there's no question that CC utilization is computed using the current (most recently reported) balance. I know that. I am just wondering whether the language on the page could (possibly) mean what it says: that FICO 8 has an additional factor, which is to compare your highest historical balance with your credit limit, presumably as an attempt to measure whether you have ever (in the time you have used the card) came close to maxxing it out.

I am also open to the possibility that FICO has just miscommunicated here, by allowing a stray extra word ("high") to imply something they do not mean. In fact, that's my guess as to what happened, though I am curious to hear if anyone knows for sure. If so, they should definitely cut it and just say "balance."

Re: "high balance" and FICO 8

Revelate — Mon, 13 Jul 2015 00:48:37 GMT

@Anonymous wrote:
I ran across the following passage today. It's from FICO, explaining the ways that FICO 8 differs from other FICO models:

High credit card usage

While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.

Keeping credit card balance low can help maintain or improve the score.

http://www.myfico.com/crediteducation/fico-score-8.aspx

The thing that struck me is that they deliberately use the term "high balance." (Emphasis mine in the quote.) That's a "term of art" -- it refers to a very specific field on your credit report. It means "the highest balance this card has ever reported." It does not mean "your current balance which is pretty darn high."

Note that, if they meant your current balance, they could have easily omitted the word "high": i.e. "if a credit report shows a balance close to the card's limit...."

Now there's no question that CC utilization is computed using the current (most recently reported) balance. I know that. I am just wondering whether the language on the page could (possibly) mean what it says: that FICO 8 has an additional factor, which is to compare your highest historical balance with your credit limit, presumably as an attempt to measure whether you have ever (in the time you have used the card) came close to maxxing it out.

I am also open to the possibility that FICO has just miscommunicated here, by allowing a stray extra word ("high") to imply something they do not mean. In fact, that's my guess as to what happened, though I am curious to hear if anyone knows for sure. If so, they should definitely cut it and just say "balance."

100% confident that's wrong nomenclature and they meant current rather than historical.

Feedback it to the admins, or if you don't wish to I can as you're right that's a confusing way to word it.

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 00:57:57 GMT

Thanks, Revelate. I have no idea how to give feedback to the admins -- so yeah, if you don't mind punting that up the chain that would be great!

Interestingly enough, this is something people naturally wonder/worry about. Does FICO ever use my "high balance" field in a damaging way? Do I therefore need to keep my CC balance always low -- so that my HB field never gets too big? I did a search on the phrase HIGH BALANCE and I saw that this question come up a lot.

If people are naturally inclined to worry that the field could be used to spank them, then that's all the more reason for that page not to explicitly say so.

Thanks again!

Re: "high balance" and FICO 8

NRB525 — Mon, 13 Jul 2015 01:04:57 GMT

Well, if it is a problem, I'm not seeing it.

During the credit bubble, I never exceeded my available credit, but a concerted set of CLD by all cards but Capital One leads to my High Balance being way upside down. If this were part of scoring, I would have no way to correct or mitigate this.

So my vote is that the text is lazy language.

Here's my "high balance" listing:

Re: "high balance" and FICO 8

Thomas_Thumb — Mon, 13 Jul 2015 02:02:57 GMT

My take on the difference the text may be alluding to is as follows:

1) Fico 8 is not as concerned with the # of cards being used compared to previous models. For example; if you have 8 cards and use 5 Fico 8 may not view this as a negative. However, previous models (Fico 4 for example) may flag this because it looks at a "high %" of cards showing a balance as a negative even if your balance is very low.

2) Fico 8 (per your quote) adds weight to the % of overall credit you are using (both in aggregate and on a per card basis). So if you go over certain threshold(s) you will see more of a negative impact on Fico 8 than with older (Fico 4, Fico 98) models.

Generally credit line is used to calculate % utilization but if no credit line is shown, it uses highest amount ever charged in the denominator to calculate % utilization.

@Anonymous wrote:
I ran across the following passage today. It's from FICO, explaining the ways that FICO 8 differs from other FICO models:

High credit card usage

While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.

Keeping credit card balance low can help maintain or improve the score.

http://www.myfico.com/crediteducation/fico-score-8.aspx

The thing that struck me is that they deliberately use the term "high balance." (Emphasis mine in the quote.) That's a "term of art" -- it refers to a very specific field on your credit report. It means "the highest balance this card has ever reported." It does not mean "your current balance which is pretty darn high."

Note that, if they meant your current balance, they could have easily omitted the word "high": i.e. "if a credit report shows a balance close to the card's limit...."

Now there's no question that CC utilization is computed using the current (most recently reported) balance. I know that. I am just wondering whether the language on the page could (possibly) mean what it says: that FICO 8 has an additional factor, which is to compare your highest historical balance with your credit limit, presumably as an attempt to measure whether you have ever (in the time you have used the card) came close to maxxing it out.

I am also open to the possibility that FICO has just miscommunicated here, by allowing a stray extra word ("high") to imply something they do not mean. In fact, that's my guess as to what happened, though I am curious to hear if anyone knows for sure. If so, they should definitely cut it and just say "balance."

Re: "high balance" and FICO 8

Revelate — Mon, 13 Jul 2015 01:27:11 GMT

@Thomas_Thumb wrote:

My take on the difference (as written) is as follows:

1) Fico 8 is not as concerned with the # of cards being used compared to previous models. For example; if you have 8 cards and use 5 Fico 8 may not view this as a negative at all. However, previous models (Fico 4 for example) may flag this because it looks at "a high "% of cards showing a balance as a negative even if your balance is very low. Note: This the difference in this factor appears to be true across all profiles

2) Fico 8 (per your quote) adds weight to the % of overall credit you are using (both in aggregate and on a per card basis). So if you go over certain threshold(s) you will see more of a negative impact on Fico 8 than with older (Fico 4, Fico 98) models. Note: The difference in this factor appears to be profile dependent

Generally credit line is used to calculate % utilization but if no credit line is shown, it uses highest amount ever charged in the denominator to calculate % utilization.

I have wondered if Fico has some metric that looks at highest credit charge during the last 12 (as opposed just the most recent month metric) on each card relative to its CL, but I have no hard data to support/refute this hypothesis.

@Anonymous wrote:
I ran across the following passage today. It's from FICO, explaining the ways that FICO 8 differs from other FICO models:

High credit card usage

While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.

Keeping credit card balance low can help maintain or improve the score.

http://www.myfico.com/crediteducation/fico-score-8.aspx

The thing that struck me is that they deliberately use the term "high balance." (Emphasis mine in the quote.) That's a "term of art" -- it refers to a very specific field on your credit report. It means "the highest balance this card has ever reported." It does not mean "your current balance which is pretty darn high."

Note that, if they meant your current balance, they could have easily omitted the word "high": i.e. "if a credit report shows a balance close to the card's limit...."

Now there's no question that CC utilization is computed using the current (most recently reported) balance. I know that. I am just wondering whether the language on the page could (possibly) mean what it says: that FICO 8 has an additional factor, which is to compare your highest historical balance with your credit limit, presumably as an attempt to measure whether you have ever (in the time you have used the card) came close to maxxing it out.

I am also open to the possibility that FICO has just miscommunicated here, by allowing a stray extra word ("high") to imply something they do not mean. In fact, that's my guess as to what happened, though I am curious to hear if anyone knows for sure. If so, they should definitely cut it and just say "balance."

Dude seriously . You are not correct in this based on everyone else's data to date. I will keep cutting and pasting but please stop ignoring everyone else's data because an 850 on a FICO 8 does not a good testing platform make. Or let a balance report on all your cards and see if you come off the 850, every single one. Betcha it does and that's not what you did from your last test that I saw.

Historical	Score	Bal Reported	Total TLs	Agg. Util %	Change
Equifax Beacon 9	693	2	9	0.4
Equifax Beacon 9	690	3	9	1.3	-3
Equifax Beacon 9	690	4	9	1.5	0
Equifax Beacon 9	686	5	9	1.6	-4
Equifax Beacon 9	703	5	9	1.6	N/A
Equifax Beacon 9	707	4	9	1.2	4

Re: "high balance" and FICO 8

Thomas_Thumb — Mon, 13 Jul 2015 02:07:46 GMT

Revelate,

All I am saying is there are a # of posts here (profiles with scores in the 700s) reporting no changes in Fico 8 score when they changed # cards reporting a balance. Sure, the score is affected at some point ... but is it given as much weight as with the Fico 4 model?- From what I have read not as much as with Fico 4 (let's forget about my profile for the moment)

The bolded statement, as I read it, implies Fico 8 adds more weight to utilization % relative to older Fico models. Whether correct or not, that is how I interpret the meaning.

Ultimately, more weight on one factor generally means less weight on another to equal out.

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 02:26:00 GMT

Hey TT. I'm just not sure how the passage I quoted implies anything about the number of accounts showing a balance. I realize that you personally believe what you said in #1 (you think that FICO 8 is less punitive about # accounts showing a balance) but I just don't see how the text quoted even remotely suggests that.

What is probably the case is that their meaning is exactly as quoted except for the word "high" omitted. In other words the text is referencing precisely one sub-factor (the utilization % for each revolving tradeline) and the intent is to say that FICO 8 is more punitive if the balance of any particular tradeline is getting close to its CL -- more punitive than previous FICO models were.

Aside from that, the text I quoted doesn't indicate whether other factors are viewed more heavily or not.

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 02:30:10 GMT

@Anonymous wrote:
I ran across the following passage today. It's from FICO, explaining the ways that FICO 8 differs from other FICO models:

High credit card usage

While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.

Keeping credit card balance low can help maintain or improve the score.

http://www.myfico.com/crediteducation/fico-score-8.aspx

The thing that struck me is that they deliberately use the term "high balance." (Emphasis mine in the quote.) That's a "term of art" -- it refers to a very specific field on your credit report. It means "the highest balance this card has ever reported." It does not mean "your current balance which is pretty darn high."

Note that, if they meant your current balance, they could have easily omitted the word "high": i.e. "if a credit report shows a balance close to the card's limit...."

Now there's no question that CC utilization is computed using the current (most recently reported) balance. I know that. I am just wondering whether the language on the page could (possibly) mean what it says: that FICO 8 has an additional factor, which is to compare your highest historical balance with your credit limit, presumably as an attempt to measure whether you have ever (in the time you have used the card) came close to maxxing it out.

I am also open to the possibility that FICO has just miscommunicated here, by allowing a stray extra word ("high") to imply something they do not mean. In fact, that's my guess as to what happened, though I am curious to hear if anyone knows for sure. If so, they should definitely cut it and just say "balance."

I thought it had no memory?

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 02:46:32 GMT

Hi SandiB. The "high balance" field does indeed have a memory. That's what it does: it remembers your highest balance. In the last few years the CRAs have been including other fields that "remember" stuff, e.g. for each card the exact amount of your balance and of that exactly how much you paid -- on any particular month in the last couple years.

What you may be asking is: Hey, I thought FICO didn't use those "memory" fields in its models, even if the CRA is giving them the data to do it. Revelate is claiming (and I am sure he's right) that the current and past FICO models do not use the High Balance field. But the text as quoted says FICO 8 does. So R and I think that they just worded that badly -- that they should cut the word "high" from the text.

It's worth observing that in future models FICO might well use some of the newer "memory" data -- not the High Balance field but the other richer month-by-month data to assess whether a person pays his balance in full or whether he sometimes (or often) carries a balance. People who carry a balance are statistically a substantially greater risk, but FICO didn't have the data in the past to assess this about individuals.

Re: "high balance" and FICO 8

NRB525 — Mon, 13 Jul 2015 03:11:40 GMT

@Revelate wrote:

Dude seriously . You are not correct in this based on everyone else's data to date. I will keep cutting and pasting but please stop ignoring everyone else's data because an 850 on a FICO 8 does not a good testing platform make. Or let a balance report on all your cards and see if you come off the 850, every single one. Betcha it does and that's not what you did from your last test that I saw.

Historical Score Bal Reported Total TLs Agg. Util % Change
Equifax Beacon 9 693 2 9 0.4
Equifax Beacon 9 690 3 9 1.3 -3
Equifax Beacon 9 690 4 9 1.5 0
Equifax Beacon 9 686 5 9 1.6 -4
Equifax Beacon 9 703 5 9 1.6 N/A
Equifax Beacon 9 707 4 9 1.2 4

What are the datestamps on these readings?

Re: "high balance" and FICO 8

Revelate — Mon, 13 Jul 2015 03:29:16 GMT

@NRB525 wrote:
@Revelate wrote:

Dude seriously . You are not correct in this based on everyone else's data to date. I will keep cutting and pasting but please stop ignoring everyone else's data because an 850 on a FICO 8 does not a good testing platform make. Or let a balance report on all your cards and see if you come off the 850, every single one. Betcha it does and that's not what you did from your last test that I saw.

What are the datestamps on these readings?

Updated sheet from Scorewatch post FICO 8 conversion here: I'll take it further if people really want but I can assure everyone that this is legit as far as EQ FICO 8 (Beacon 9.0) is concerned. I don't have my old Beacon 5.0 data anymore unfortunately, and no real interest in signing up for Equifax Scorewatch to recreate it as it was already beaten to death before.

Historical	Score	Bal Reported	Total TLs	Agg. Util %	Change	Date
Equifax Beacon 9	693	2	9	0.4		5/13/14
Equifax Beacon 9	690	3	9	1.3	-3	5/15/14
Equifax Beacon 9	690	4	9	1.5	0	5/16/14
Equifax Beacon 9	686	5	9	1.6	-4	5/22/14
Equifax Beacon 9	703	5	9	1.6	N/A	5/25/14	(Tax Lien withdrawn)
Equifax Beacon 9	707	4	9	1.2	4	5/31/14

Re: "high balance" and FICO 8

NRB525 — Mon, 13 Jul 2015 03:47:12 GMT

Congrats on the tax lien withdrawal.

And I agree that letting a card come online with reporting will result in a score change.

One of the... opinions, uncertainties, questions... I still have though, is what happens when those 5 cards are allowed to continue reporting for a month, two months? Does the score get familiar with that new profile and recover the "shock" points from a card coming from zero to something?

Re: "high balance" and FICO 8

Revelate — Mon, 13 Jul 2015 04:08:22 GMT

@NRB525 wrote:
Congrats on the tax lien withdrawal.
And I agree that letting a card come online with reporting will result in a score change.

One of the... opinions, uncertainties, questions... I still have though, is what happens when those 5 cards are allowed to continue reporting for a month, two months? Does the score get familiar with that new profile and recover the "shock" points from a card coming from zero to something?

Not sure where this shock point bit is coming from: tradelines can go inactive as has been intimated previously, but it's because a lender doesn't report it for a period of time, not that suddenly it went from $0 to non-zero. It's probably 6 months if I had to guess based on the requirements to generate a FICO score.

The only alert around this is a configurable one in the Scorewatch options.

For those suggesting that a pattern of revolving utilization is bucketable well, I sort of doubt it as there's hardly been any reports of that ever: I can only recall one where someone had high aggregate utilization, he paid it down to some small number, and didn't see a score jump till 4 months later, but never saw any real data on that. Most people get a score change immediately.

As for it, I usually just let balances report where they may, and go from 3-5 cards regularly but when I get clean by reducing my cards with balances (in my case, 2/9 or 1/9 is optimal under Beacon 9) I get a score boost, and when I get laissez-faire about it, I walk back down the points as shown in my data.

The absolute value of those point movements have changed with time and my file, but it's still held drop a number of points, go back up same number of points at least when we're talking about aggregate utilization around the margins (1-2% in my case for pretty much most of my time).

Re: "high balance" and FICO 8

cashnocredit — Mon, 13 Jul 2015 04:28:10 GMT

Ah, the meaning of "high balance"

It's a descriptor for a field in an account entry but it can also be read that the word "high" is just an adjective modifying the noun "balance" while discussing the currently reporting balance I'd bet that is the intended meaning.

Butressing this is the fact that people that have high usage often have very high "high balance" fields and creditors like to see this. It means people can use the CL and pay it off.

As an aside, Ive run up pretty large "high balances" and it's never had an adverse affect on FICO scores once the utilization was reduced to nominal levels.

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 04:49:08 GMT

Hello CnC. If the choice of the word high was deliberate, it was a bad choice. Note that omitting the word entirely conveys the same meaning: "if a credit report shows a balance close to the card's limit...." A balance close to the card's limit is certainly one that is high. But by using the name of a field that appears on the credit report ("high balance") they ended up saying something very different than they (presumably) wanted to convey.

It's a bit like using the phrase "new haven" when discussing Ivy League schools. If you are trying to describe a haven that is new (as opposed to older more established havens) then you better be sure that the context admits of no misunderstanding. Otherwise expect that people might think you are talking about the town that Yale is located in.

Re: "high balance" and FICO 8

cashnocredit — Mon, 13 Jul 2015 05:16:08 GMT

@Anonymous wrote:
Hello CnC. If the choice of the word high was deliberate, it was a bad choice. Note that omitting the word entirely conveys the same meaning: "if a credit report shows a balance close to the card's limit...." A balance close to the card's limit is certainly one that is high. But by using the name of a field that appears on the credit report ("high balance") they ended up saying something very different than they (presumably) wanted to convey.

It's a bit like using the phrase "new haven" when discussing Ivy League schools. If you are trying to describe a haven that is new (as opposed to older more established havens) then you better be sure that the context admits of no misunderstanding. Otherwise expect that people might think you are talking about the town that Yale is located in.

I completely agree it's a bad choice of words but I'm not sure how many people would read it as the "high balance" field. Most all third party reports merge the two into high balance/ credit limit so it's likely not many will read it to mean the actual "high balance." MyFico is a bit schizoid and doesn't call it high balance but largest past balance on a single EX credit report but does list the item as "high balance" on the tri-merge reports.

I agree the phrasing needs to be reworded as a lot of folks here are credit geeks and could read it wrongly.

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 05:50:32 GMT

As you say, the tri-merge report from myFICO calls it High Balance.

Experian provides this link to a sample report, and it appears to be called High Balance here too:

http://www.experian.com/credit_report_basics/pdf/samplecreditreport.pdf

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 05:55:38 GMT

As you say, the tri-merge report from myFICO calls it High Balance.

This sample report from Experian also appears to call it High Balance:

http://www.experian.com/credit_report_basics/pdf/samplecreditreport.pdf

Re: "high balance" and FICO 8

Anonymous — Mon, 13 Jul 2015 07:17:43 GMT

@Thomas_Thumb wrote:
Revelate,

All I am saying is there are a # of posts here (profiles with scores in the 700s) reporting no changes in Fico 8 score when they changed # cards reporting a balance. Sure, the score is affected at some point ... but is it given as much weight as with the Fico 4 model?- From what I have read not as much as with Fico 4 (let's forget about my profile for the moment)

The bolded statement, as I read it, implies Fico 8 adds more weight to utilization % relative to older Fico models. Whether correct or not, that is how I interpret the meaning.

Ultimately, more weight on one factor generally means less weight on another to equal out.

As I stated before, bought some new furniture and put it across 4 cards (20k) and still had 2 reporting a smaller balance. I let this happen on purpose to see what effect it would have on my score. NONE. Now I will work on paying them down but not too much as I want to see what the simulator says also. Looks like the change, after all is said and done, will have a positive impact on my score. Fico 8. Not all of my new cards hit either. But when they do, they will have a zero balance. But never a change from one card reporting a balance below 9% to 6 cards reporting 15%. Not all new cc's with large CL's have reported yet to lower my UT.