topic Re: Active or Passive FICO Management in General Credit Topics

Active or Passive FICO Management

youdontkillmoney — Fri, 29 May 2015 13:58:59 GMT

I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment. This latter method has always landed me in the 780+ FICO since I started. Sure if I had to many inquiries my FICO may drop 10-20 points, but after a few months goes right back up to 780+ again. Basically I don't actively manage or worry about how so and so will affect my credit, and spend too much time fretting credit decisions so as long as I don't miss a payment or late. Currently I have 4 credit cards, Amex Platinum, Citi Prestige, Iberiabank and Simmons First; and 5 PLOCs.

How about you?

Re: Active or Passive FICO Management

kdm31091 — Fri, 29 May 2015 13:57:53 GMT

It really comes down to how "anal" you are about it. You can have a great score by just using the cards responsibly, not charging more than you can afford, but otherwise being more "passive" i.e. not micromanaging.

Some people love to micromanage util and keep everything very organized. Pay the card before statement cut, etc. I don't really know that it makes a significant difference with scoring, but it makes some people feel better.

With that said, unless you are someone who apps constantly, consuming a lot of your time with your FICO score is overkill. "Passive' management, i.e. simply following good credit common sense, is enough, IMO. No need to let credit consume your life.

Re: Active or Passive FICO Management

Anonymous — Fri, 29 May 2015 13:54:44 GMT

I will only optimize before apping for a car or mortgage. I did this a bit last month knowing we were more likely than not purchasing a timeshare through DVC on our last Disney trip.

Re: Active or Passive FICO Management

youdontkillmoney — Fri, 29 May 2015 13:56:10 GMT

And I know someone who is really passive, not even checking their score, has one CC (hardly uses it), one student loan, pays on time, etc.....and her score is in the 800+ range, better than mine!

Re: Active or Passive FICO Management

kdm31091 — Fri, 29 May 2015 14:08:29 GMT

@youdontkillmoney wrote:
And I know someone who is really passive, not even checking their score, has one CC (hardly uses it), one student loan, pays on time, etc.....and her score is in the 800+ range, better than mine!

Exactly. The micromanaging certainly is not the only strategy available to have good credit.

Re: Active or Passive FICO Management

jacksont1981 — Fri, 29 May 2015 15:13:10 GMT

I think more people are micromanagers of their credit if they are recovering from bad credit. I know I watch my credit like a hawk simply because I made some mistakes in my younger years and I finally fixed them now at the old age of 33 LOL and I just want to make sure I dont make those mistakes again. I do know that once my reports are clean that I will not obsess over my credit like I am now though. As long as I am never late and only charge what I can afford and apply for what I will use and benefit me and my family, I will be good. Just my viewpoint on my credit profile.

Re: Active or Passive FICO Management

Anonymous — Fri, 29 May 2015 15:20:09 GMT

@jacksont1981 wrote:
I think more people are micromanagers of their credit if they are recovering from bad credit. I know I watch my credit like a hawk simply because I made some mistakes in my younger years and I finally fixed them now at the old age of 33 LOL and I just want to make sure I dont make those mistakes again. I do know that once my reports are clean that I will not obsess over my credit like I am now though. As long as I am never late and only charge what I can afford and apply for what I will use and benefit me and my family, I will be good. Just my viewpoint on my credit profile.

+1 I'm at the old age of 33 as well recovering from bad credit decisions and management of my 20s. I'm currently watching my credit like a hawk to ensure my recovery is going as planned. I'll ease up on micro managing when bad things finish falling off and my new cards have about 6 months reporting history. But I plan to app for a mortgage next year so I have to be deligent for a while yet.

Re: Active or Passive FICO Management

Anonymous — Fri, 29 May 2015 15:36:06 GMT

@youdontkillmoney wrote:
I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment. This latter method has always landed me in the 780+ FICO since I started. Sure if I had to many inquiries my FICO may drop 10-20 points, but after a few months goes right back up to 780+ again. Basically I don't actively manage or worry about how so and so will affect my credit, and spend too much time fretting credit decisions so as long as I don't miss a payment or late. Currently I have 4 credit cards, Amex Platinum, Citi Prestige, Iberiabank and Simmons First; and 5 PLOCs.

How about you?

I think if you are doing this sometimes, then I'd say you actually fall somewhere in between both schools of thought. Is your 780+ with balances reporting on all of your cards at the same time? I'd be more likely to think that your score drops on months when you got new accounts because of the minor AAoA hit + inquiry hit + maybe you didn't pay any of your balances before statement closing. I can't imagine inquiries and inquiries alone leading to such a large drop, but I suppose it's possible if we're talking about 5+ inquiries in a short period that lead to no new accounts. Is the number of accounts reporting a balance ever different when you see these swings?

@kdm31091 wrote:
It really comes down to how "anal" you are about it. You can have a great score by just using the cards responsibly, not charging more than you can afford, but otherwise being more "passive" i.e. not micromanaging.

Some people love to micromanage util and keep everything very organized. Pay the card before statement cut, etc. I don't really know that it makes a significant difference with scoring, but it makes some people feel better.

With that said, unless you are someone who apps constantly, consuming a lot of your time with your FICO score is overkill. "Passive' management, i.e. simply following good credit common sense, is enough, IMO. No need to let credit consume your life.

I feel like the answer to this depends on exactly how passive you would be if you weren't being anal. In my opinion, it will make a significant difference to go from one card reporting a balance to all of them reporting a balance. As long as you aren't planning on apping for anything or fear AA due to new accounts, I guess it doesn't really matter. However, I'm sure it would affect your score noticeably.

My TU FICO just dropped from 765 to 759 with two new accounts reporting (AAoA went from almost 6 years to just above 5 years), 1 additional balance being reported (2 of 16 cards with a balance) and 1 new inquiry. The balances on my cards are 15% and 5% utilization. I'm sure that if I let even one more balance report with a >30% utilization I'd see another similar drop. I'd consider that significant, at least for me.

I think the anecdotal evidence of people who don't pay attention to FICO but happen to have a good one results from the fact that they optimize by accident. Most people who aren't on MyFICO and manage credit responsibily may have a 2-3 cards. They often only use one of them actively and they let that balance report and pay their bill before it's due. Assuming they are paying all their bills in the same way, then what do you know? They did what us anal people do without even knowing they were doing it. My mom falls under this category.

My reasons for following the active FICO management route over the past 9 months are: a) I've been applying for a lot of cards to make up for 10+ years of not taking advantage of credit card rewards and bonuses, and b) I would like to avoid AA from all the new accounts.

By the end of the year I would like to be somewhere in the middle of active and passive FICO management. The only times I will optimize completely are when I'm planning to apply for new credit because it does make a difference. The only question is how much do you care about that difference.

Re: Active or Passive FICO Management

Anonymous — Fri, 29 May 2015 15:40:13 GMT

33 seems to be the magic number on this thread Count me in too! But I'm more passive now compared to last summer when I got my first cards. Micromanaging I no longer do bc my scores seem to be coming along and rebounding from slight set backs just fine. Pay bills on time, use my cards, thats pretty much enough for me. Util stays low but its more personal preference than micromanaging.

Last year I would have been scared to put a couple trips on my card and let a highish balance report due to freaking out about score impact but now? Pfft. Have three trips in mind which I'm about to purchase all at once for about $3,500 total and let report then pay off.

Re: Active or Passive FICO Management

Anonymous — Fri, 29 May 2015 18:17:15 GMT

What benefits do you get for letting it report and then paying off?
As opposed to not letting it report?

Re: Active or Passive FICO Management

youdontkillmoney — Fri, 29 May 2015 20:17:23 GMT

@Anonymous wrote:
What benefits do you get for letting it report and then paying off?
As opposed to not letting it report?

^^^^

For me I don't really care if it reports and I pay it off completely or I pay it off before it reports. What I care about is it is paid off and if I do it early, it is just because I am anal about it. In the end, either way, my FICO is still fine. So you can say I don't purposely optimize by planning and analyzing, I just pay all my bills on time.

Re: Active or Passive FICO Management

Anonymous — Fri, 29 May 2015 21:36:38 GMT

In Canada where I have a long credit history I never cared about it. I didn't even check my credit score before applying for my mortgage, just assumed that my score would be good, and it must have been, because I got approved with a good rate. From following the passive strategy: regularly paying in full, getting cards becuase I need/want them, and otherwise ignoring credit. The only time I checked was when there was an identity theft, and then I did not actually look at my score just go through and clean out the bogus accounts that the fraudster tried to open.

Here in the US I'm in a different situation, my credit file is only 9 months old and it has a material impact on things I want to do in the next couple of years, so I read through this forum in detail, watch my score, and plan my moves.

I would assume that in a few years once I have 3-4 years of good history I will again just stop caring about it and assume that so long as I take care of my bills, the score will take care of itself.

So I would agree that the passive strategiy is the right one for 99% of people, but at the moment I'm in the other 1%, for at least a couple of years.

Re: Active or Passive FICO Management

Revelate — Sat, 30 May 2015 03:47:22 GMT

My experience with low utilization and paying off post closing date is I can make a swing of around 15ish points in my reporting wandering from 1-5 cards with balance on a FICO 8 and maybe a FICO 4 looking at my historical numbers. That's with my 700ish scores on the FICO 8 models.

I don't bother optimizing accounts unless I'm applying for anything (and that includes CC's for me) but especially for mortgage where I'm in the range where a swing of a few points downward costs me .125% on the loan... no thanks! I absolutely FICO strategized this time and as a result I posted my highest Beacon 5.0 ever... took me 3.5 years to get to a 700 but did it, and I was at a 693 with 3 balances reporting.

Really it doesn't matter in the grand scheme of things, I don't think lenders care how many cards have a balance on them, they look at aggregate balance trends instead... and if I were gold-plated (read, sufficiently north of 760 on any score I care about not to give a damn) I probably wouldn't even bother cleaning up for CC apps and maybe not even for auto loans. Mortgage I will always, always clean up for even if I have an 850 score on FICO 8 as FICO 04/98 is where it's at.

Re: Active or Passive FICO Management

Revelate — Sat, 30 May 2015 07:14:02 GMT

@youdontkillmoney wrote:
I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment. This latter method has always landed me in the 780+ FICO since I started. Sure if I had to many inquiries my FICO may drop 10-20 points, but after a few months goes right back up to 780+ again. Basically I don't actively manage or worry about how so and so will affect my credit, and spend too much time fretting credit decisions so as long as I don't miss a payment or late. Currently I have 4 credit cards, Amex Platinum, Citi Prestige, Iberiabank and Simmons First; and 5 PLOCs.

How about you?

Something I missed on the first time around and a little OT, but why 5 PLOC's?

Re: Active or Passive FICO Management

takeshi74 — Sat, 30 May 2015 13:27:28 GMT

@youdontkillmoney wrote:
I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment.

Of course, people and situations vary though a lot of myFICO forum users are building/rebuilding and that certainly has an impact on the popularity of certain topics and options. I do keep an eye on utilization but I don't micromanage it or number of reported balances. My spend and limits are now placing me at about 8% and that's with some balances on 0% offers. Most of my 13 cards report balances but I'm fine with my scores where there are -- ~800.

I paid much more attention back in 2013 when I had just started learning and was recovering from extremely high utilization. Back then I was using a CMS for daily pulls to determine when to app for cards. At this point I just app if I come across one that I need/want which isn't all that frequent these days as I think I have my spend covered in terms of rewards.

Re: Active or Passive FICO Management

youdontkillmoney — Sat, 30 May 2015 14:26:28 GMT

@Revelate wrote:
@youdontkillmoney wrote:
I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment. This latter method has always landed me in the 780+ FICO since I started. Sure if I had to many inquiries my FICO may drop 10-20 points, but after a few months goes right back up to 780+ again. Basically I don't actively manage or worry about how so and so will affect my credit, and spend too much time fretting credit decisions so as long as I don't miss a payment or late. Currently I have 4 credit cards, Amex Platinum, Citi Prestige, Iberiabank and Simmons First; and 5 PLOCs.

How about you?

Something I missed on the first time around and a little OT, but why 5 PLOC's?

At one point I had 23 CC and trimmed it down to 4 top shelf ones. I am not cancelling any PLOC since the 5 I have were hard won with submissions of W2's, etc.

Re: Active or Passive FICO Management

Revelate — Sun, 31 May 2015 07:07:59 GMT

@youdontkillmoney wrote:
@Revelate wrote:
@youdontkillmoney wrote:
I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment. This latter method has always landed me in the 780+ FICO since I started. Sure if I had to many inquiries my FICO may drop 10-20 points, but after a few months goes right back up to 780+ again. Basically I don't actively manage or worry about how so and so will affect my credit, and spend too much time fretting credit decisions so as long as I don't miss a payment or late. Currently I have 4 credit cards, Amex Platinum, Citi Prestige, Iberiabank and Simmons First; and 5 PLOCs.

How about you?

Something I missed on the first time around and a little OT, but why 5 PLOC's?
^^
At one point I had 23 CC and trimmed it down to 4 top shelf ones. I am not cancelling any PLOC since the 5 I have were hard won with submissions of W2's, etc.

OH my question was more along the lines of what are or were they used for?

I'm planning to pick up a PLOC but I see it more of a last step before emergency fund use... which doesn't really translate to needing more than call it 2 mortgage payments worth of limit on it; not seeing much rationale for 5 personally.

Re: Active or Passive FICO Management

Blodreina — Sun, 31 May 2015 14:39:00 GMT

I'm in between. I pay attention to the Fico penalties (e.g., too many accounts with balances), but my limits are high enough that my utilization is never a problem fico-wise. So, for 5 cards, two report whatever balance is on them at the time (typically the cards that I use for daily spend, since pending transactions often screw with paying before statement dates).

Re: Active or Passive FICO Management

youdontkillmoney — Sun, 31 May 2015 16:00:06 GMT

@Revelate wrote:
@youdontkillmoney wrote:
@Revelate wrote:
@youdontkillmoney wrote:
I've noticed there are at least two schools of thought on the matter of FICO score maximization. Active management whereby one may purposely keep utilization at a certain percent and / or keep a balance on one card, etc. The other school of thought which I've subscribed to for the past 24 years and that is not track such metrics as utilization but use cards as I need them, pay them off as I can, usually in full each month, sometimes before statement cycle closes because I just want to wipe out that bill and not worry about it, open and close cards as I feel, and never, ever be late or miss a payment. This latter method has always landed me in the 780+ FICO since I started. Sure if I had to many inquiries my FICO may drop 10-20 points, but after a few months goes right back up to 780+ again. Basically I don't actively manage or worry about how so and so will affect my credit, and spend too much time fretting credit decisions so as long as I don't miss a payment or late. Currently I have 4 credit cards, Amex Platinum, Citi Prestige, Iberiabank and Simmons First; and 5 PLOCs.

How about you?

Something I missed on the first time around and a little OT, but why 5 PLOC's?
^^
At one point I had 23 CC and trimmed it down to 4 top shelf ones. I am not cancelling any PLOC since the 5 I have were hard won with submissions of W2's, etc.
OH my question was more along the lines of what are or were they used for?

I'm planning to pick up a PLOC but I see it more of a last step before emergency fund use... which doesn't really translate to needing more than call it 2 mortgage payments worth of limit on it; not seeing much rationale for 5 personally.

^^^

Yes, the purpose is more of a last step for emergency funds...as for 5, one PLOC limit is only $1,000, so hence the reason for multiple and I don't want to ask for an increase to risk a hard inquiry, and also for emergency back up in case one bank decides to cancel one on me for whatever reason, etc. Basically 5 gives me options and I learned in life having options is worth having since I like choices.

Re: Active or Passive FICO Management

youdontkillmoney — Sun, 31 May 2015 17:02:06 GMT

Even though Transunion Vantage score 3.0 is not a real "FICO" and different model, it is one of the free ones I have access to for now, it will be interesting to see how my scores changes in the next few months when the credit reports only show my open card accounts (4 which is down from 22-23 CC) and 5 PLOCs, right now it shows the following and will update the board in a month or so when my current open tradelines reflect (currently 820 out of 850):