topic FICO Phobias in General Credit Topics

FICO Phobias

thornback — Sun, 07 Apr 2019 19:05:35 GMT

Hey Y'all...

So, this post is an extension of a discussion that stemmed from a post (by new member @TCOWis) which was successfully hijacked by myself, @Remedios, and @ImTheDevil. While the gist of the original discussion revolved around 'no revolving credit usage' penalty, it quickly veered off into a convo about the fear and anxiety that comes from losing a few FICO points here and there due to scoring factors that are within our control. @Remedios commented about the need for us, as a forum, to somewhat dampen our push of AZEO and balance micro-management to builders and rebuilders as a means to regularly managing one's credit for fear that doing so could, potentially, create irrational fears when it comes to using their credit and the resulting changes to their credit scores. And I agree.

Is AZEO a great method to implement when necessary? Yes.
Is AZEO necessary on a routine basis? Absolutely not.
Must you always maintain both aggregate and individual util at less than 8.9% or aggregate at less than 8.9% and individual below 28.9%? No. and No.
Should we concern ourselves when we lose 2, 5, or 10 FICO points just because a higher balance reported or we had 50% of our cards reporting a balance ? No.

AZEO is a one-time score booster -- maintaing it month after month will not result in an additional boost in score month after month. Use it when you know you will be apping for something in the near future gain those few extra FICO points. If you're not apping - then don't stress about it and just know, in the back of your mind, that you can implement it when needed.

Micromanaging utilization is a biggie. People do this for various reasons including fear of accumulating debt and fear of reporting high utilization and losing points.

Should you try to prevent max or near-max util from reporting? Absolutely Yes.
Must you pay off or down all of your balances before they report? No. Especially not if, on an individual level, they are less than 28% usage and within 8.9% -28.9% aggregate. Might you lose a few points for this? Sure -- but the loss is temporary.

Number of cards reporting a balance is another one -- not speaking specifically of AZEO, but just in general. The "FICO ideal' is to have no more than 1/3 (33%) of your cards report a balance to prevent a scoring penalty. But, is this ideal for you? If you use more than 1/3 of your cards on a regular basis you'd have to pay some of them off before the statement cuts to prevent "too many balances" reporting. This is NOT "normal" credit use behavior -- it is "FICO Forums" behavior. If you are not applying for anything, and your utilization is within the 'good' range, then why not let your cards report naturally and just pay your statement balances in full on the due date? Will it cost you a few points? Probably -- but, again, the loss is temporary and easily rectified.

Credit cards offer a 25-day grace period to pay our bills -- so why not take advantage of that? If you are properly managing your finances and are not overspending, there should be no difference between paying before the statement cuts and paying on/before the due date and, unless you have low starter limits, there should be no need to pay multiple times per month.

I think we need to place the most focus on the following:

Paying on-time, everytime
Paying statement balances in full on the due date every single month so not to build debt (aside from BT /large balances planned to carry)
Aging accounts / Gardening

And let's eliminate the fear of NOT consistently adhering to the following:

AZEO as a regular method of credit maintenance
Micromanaging utilization and balance reporting every single month

The paranoia of screwing up again is high... as is the obsession over achieving high scores for the first time ever or in years; and most will want to do whatever they can to prevent the former and acquire the latter. Utilization and the number of balances reporting are two FICO factors that we can control --but we don't have to do so obsessively for fear of losing a few points. AZEO and Util thresholds should be considered FICO Backdoors - useful scoring shortcuts to take advantage of when the need for the highest possible score arises -- and I think that is how they should be presented to new forum members.

I have a challenge for those of you whom routinely implement AZEO and micromanage your balances (out of concern for your scores, not simply becuase it is your prefercnce): STOP.

For ONE month -- no AZEO, no super low 1% util. Let your balances report naturally (assuming the util isn't dumb high) and see how your scores react. See if we can get the irrational fear of losing points due to utilization and/or mulitple balances reporting to subside. Of course, if your 'natural' utilization is above 30% , then pay down a balance or two before it reports; but if it's less than 30% -- just let it ride for a month and see what happens (Spoiler: nothing terrible will happen). "Normal" people use their cards and pay them by the due date and generally have no issues with existing creditors or acquiring new credit.

NOTE: The 'let your cards report their balances' challenge is for those with decent, usable card limits. Some rebuilders may not be able to just let their balances report naturally becuase a $50 balance may equate to 80% util for them. These folks can, however, forgo AZEO for a month.

That is all. I'd love to hear other's thoughts -- and any other FICO Phobias not mentioned...

Re: FICO Phobias

Anonymous — Sun, 07 Apr 2019 22:40:48 GMT

You are completely correct. I, achieved AZEO for the first time. It took a lot of work for the one point gain. Never again. It amazes me when someone posts there score dropped a few points.

Re: FICO Phobias

Anonymous — Sun, 07 Apr 2019 22:48:35 GMT

To be honest, i would take the assumptions a step further and put forth that many many people out there do not PIF monthly and carry balances for extended periods with no AA taken as long as they make payments each month. I can tell you firsthand that for a long time I carried a substantial balance and only occasionally paid more than the minimum, and had exactly zero AA even then. We have to keep in mind that here at MF, we are the outliers. We do NOT represent the general population. We sweat UTI percentages, we analyze the angles on scoring, we (collectively, as in those who were here long before me - I was not part of it) figured out AZEO and app strategies and reporting plans and CLI angles to play. Joe Sixpack does not do this. He buys a TV on his card and makes payments on it monthly when it’s due while using his card to buy other things, and his balances report. You know what? Most of the time he’s just fine. His scores don’t nosedive, he can get a mortgage, he can get a car financed.

Do I think it’s better to do things the “MF Way”? I think so, both to minimize point loss but moreso to knock down the risk of a bad life event putting us into a hole that drives up our debt. They say the average household today has $8000+ in unsecured debt. I’ve recently dropped below $7000 and each month I continue to drop. Some cards may have increased UTI in a month-over-month case while others drop. (Spent $350 at Kohl’s on my card this weekend getting clothes for my daughters, and put two nights at a Hampton Inn on my HH Ascend card. Some portion of those expenditures may report. At the same time I paid Disco $500, $80 to Home Depot, and $75 to Target. This happens as often as not. Yet my scores do still improve, my UTI moves in a net lower usage direction each month, and my lenders not only haven’t taken AA despite balances, but several have granted CLIs even with UTI above the magical 28.9% barrier. Each month overall I owe a little less than I did the previous month, I never EVER miss a due date, and I never exceed a limit. I will echo the OP in saying these last three criteria I feel are what matters more than anything.

Ideally I would be at 8.9% aggregate and <28.9% individual. A few of my cards are already between 0 and 27%. Over the next few months some more will get there too. Eventually I will be in the sweet zone as well and my scores will fully reflect that. In the meantime, I focus on those three key points with a secondary goal of getting below 28.9%, but (speaking facetiously) I’m not chewing my nails to the quick trying to figure how in the heck I’m gonna knock $32 more of a card balance off by midnight so it doesn’t report 29.1%. It’s not necessary.

Ultimately, as stated by OP, each rebuilder comes to their own realizations about what they need to do. At the outset of a rebuild, nailing the percentages and watching scoring thresholds like a hawk is great - it will help you grow your scores and your credit faster than anything. When you’re established again, or well on your way as I am now (thanks to also adhering to the MF Way at the outset) you can relax a bit, sweat the extra points when an app is looming, and otherwise use, and let report, your cards more “real world” style and you’ll still be OK. I do still sweat points as I’m not fully rebuilt yet, but I don’t sweat it like I used to. No stagnant aggregate UTI, no missed payments or max UTI, and also no AA, no balance chasing, and no CLDs.

Re: FICO Phobias

thornback — Sun, 07 Apr 2019 22:49:27 GMT

This is another thing... AZEO bonus points are profile specific - some will gain about 8-10 points from implementing AZEO while others gain only 1-5 points. In my case, I can squeeze out about 7 points on FICO 8 and 11 points on Mortage scores - which appear to respond to AZEO better than FICO, regardless of profile. Did you happen to have access to your mortgage scores at the time you achieved AZEO? If so, then that may be its only usefullness for you and others with similar profiles...

And yes, it is a lot of extra effort month-to-month, and if you don't benefit from it by more than 5 points, i can't say it's worth it, even if only done prior to apping.

The posting of small score drops is due to the obsession many of us seem to develop during the rebuild stage; I believe it stems from a fear of failing in the endeavor...

@Anonymous wrote:
You are completely correct. I, achieved AZEO for the first time. It took a lot of work for the one point gain. Never again. It amazes me when someone posts there score dropped a few points.

Re: FICO Phobias

thornback — Sun, 07 Apr 2019 23:02:17 GMT

@Anonymous wrote:
To be honest, i would take the assumptions a step further and put forth that many many people out there do not PIF monthly and carry balances for extended periods with no AA taken as long as they make payments each month. I can tell you firsthand that for a long time I carried a substantial balance and only occasionally paid more than the minimum, and had exactly zero AA even then. We have to keep in mind that here at MF, we are the outliers. We do NOT represent the general population. We sweat UTI percentages, we analyze the angles on scoring, we (collectively, as in those who were here long before me - I was not part of it) figured out AZEO and app strategies and reporting plans and CLI angles to play. Joe Sixpack does not do this. He buys a TV on his card and makes payments on it monthly when it’s due while using his card to buy other things, and his balances report. You know what? Most of the time he’s just fine. His scores don’t nosedive, he can get a mortgage, he can get a car financed.

Do I think it’s better to do things the “MF Way”? I think so, both to minimize point loss but moreso to knock down the risk of a bad life event putting us into a hole that drives up our debt. They say the average household today has $8000+ in unsecured debt. I’ve recently dropped below $7000 and each month I continue to drop. Some cards may have increased UTI in a month-over-month case while others drop. (Spent $350 at Kohl’s on my card this weekend getting clothes for my daughters, and put two nights at a Hampton Inn on my HH Ascend card. Some portion of those expenditures may report. At the same time I paid Disco $500, $80 to Home Depot, and $75 to Target. This happens as often as not. Yet my scores do still improve, my UTI moves in a net lower usage direction each month, and my lenders not only haven’t taken AA despite balances, but several have granted CLIs even with UTI above the magical 28.9% barrier. Each month overall I owe a little less than I did the previous month, I never EVER miss a due date, and I never exceed a limit. I will echo the OP in saying these last three criteria I feel are what matters more than anything.

Ideally I would be at 8.9% aggregate and <28.9% individual. A few of my cards are already between 0 and 27%. Over the next few months some more will get there too. Eventually I will be in the sweet zone as well and my scores will fully reflect that. In the meantime, I focus on those three key points with a secondary goal of getting below 28.9%, but (speaking facetiously) I’m not chewing my nails to the quick trying to figure how in the heck I’m gonna knock $32 more of a card balance off by midnight so it doesn’t report 29.1%. It’s not necessary.

Ultimately, as stated by OP, each rebuilder comes to their own realizations about what they need to do. At the outset of a rebuild, nailing the percentages and watching scoring thresholds like a hawk is great - it will help you grow your scores and your credit faster than anything. When you’re established again, or well on your way as I am now (thanks to also adhering to the MF Way at the outset) you can relax a bit, sweat the extra points when an app is looming, and otherwise use, and let report, your cards more “real world” style and you’ll still be OK. I do still sweat points as I’m not fully rebuilt yet, but I don’t sweat it like I used to. No stagnant aggregate UTI, no missed payments or max UTI, and also no AA, no balance chasing, and no CLDs.

I completely agree with everything stated here. I've been doing the same, letting balances report, carrying a balance here and there -- the key, as you stated, is to pay on-time and make sure your overall balance continues to be reduced, not steadily increase.

I also wonder if those that start their (re)build under the AZEO and util threshold gospels will utlimately struggle with moving into a more 'real-world' method of credit management; and once they do finally move into that stage, will they find it more difficult? I almost feel as though methodically following AZEO from the very beginning leaves very little room to become comfortable with managing credit post-rebuild (unless they plan to do AZEO for the rest of their lives).

Re: FICO Phobias

Anonymous — Mon, 08 Apr 2019 00:03:05 GMT

The reason to avoid carrying balances is not to improve one's FICO scores, since the FICO models can't tell whether you are carrying a CC balance. It's to avoid paying outrageously high interest rates, often in excess of 20%. A corrolary to carrying CC debt (on which one pays high interest rates) is that such a person typically has almost no money saved -- either in retirement savings or just a regular savings account. If he does, then he's choosing to pay high interest to CC companies in preference to getting 2% on a savings account, which reveals a different set of problems.

The exception of course is carrying a balance on a 0% card -- then the cardowner might have strong savings, which is fine.

ImTheDevil is right that Joe Sixpack often buys a lot on cards and makes minimum payments. Joe was also destroyed by the 2008 meltdown. He's destroyed in fact when he loses his job during a happy time for the economy, or if his wife loses her job, or if he has a kid with an unexpected challenge like autism. He will also likely be devastated in retirement, when he realizes Medicare and SS are not enough to support himself.

As far as AZEO, I have been thinking about creating a thread that tells a person everything he needs to know about it. I have certainly stayed on message every time that the subject comes up, namely that it gives you no help whatsoever in building a score over time, though it can be especially helpful shortly before an important credit app like a mortgage.

Re: FICO Phobias

Anonymous — Mon, 08 Apr 2019 01:53:46 GMT

You all make some great points! I think some of these "phobias" that many of us have about credit are also due to the fact that we did NOT know how to manage our credit lives before. Now that someone tells us how, it's hard not to get obsessed about gaining (or losing) points.

I can't tell you how much I have learned from these forums, I wish I would have known this stuff 20 years ago. Thanks to all of you!!

Re: FICO Phobias

CreditInspired — Mon, 08 Apr 2019 02:54:58 GMT

Thank you OP for outlining successful habits to adopt as we navigate the credit world.

I agree 100% with this analogy because for the last 2 years this was me—micromanaging my credit like crazy doing the AZEO method; and although my scores were beautiful (790-804), the process itself was driving me nuts.

So at the beginning of the year, I decided with my scores, it wasn’t going to matter if I had a 10-15pt drop, my scores were still in the range to get the best interest rate possible if I wanted to apply for another card and not worry about approvals.

So last month, I did 2 BTs and I almost had a heart attack when I did my weekly pull from CK and my EQ score had dropped 51pts and TU 44pts. I quickly rebound because I recalled I only use CK for monitoring. So I pulled my scores from CCT. Yes, there was a score drop for crossing 28.9% (went from 4% UT to 32% UT) and having 2 more cards reporting a balance. But it was only a drop of ~10pts, which will correct itself next month.

I’m much calmer now and I use my credit without micromanaging every aspect of it. AZEO definitely works when applying for a mortgage. NFCU LO told me my application was the easiest and cleanest one she had done in a really long time. I grinned from ear-to-ear, especially since I was a first time homebuyer.

Again, thanks, because this will indeed help newbies.

Re: FICO Phobias

CreditInspired — Mon, 08 Apr 2019 03:11:15 GMT

@Anonymous wrote:

We do NOT represent the general population. We sweat UTI percentages, we analyze the angles on scoring, we (collectively, as in those who were here long before me - I was not part of it) figured out AZEO and app strategies and reporting plans and CLI angles to play. Joe Sixpack does not do this. He buys a TV on his card and makes payments on it monthly when it’s due while using his card to buy other things, and his balances report. You know what? Most of the time he’s just fine. His scores don’t nosedive, he can get a mortgage, he can get a car financed.

——————-

Thanks for this reminder. Sometimes we really do forget that we in this

forum are in the minority.

But I’m happy I joined the forum to learn how to create and maintain a great credit profile. I’ll always be humble and thankful for all the knowledge I learned here and will continue to learn here. This forum help get me from 640 with 1 CC when I joined to where I am today.

So as in an earlier post I replied to, it’s just so nice now not to have to micromanage.

Re: FICO Phobias

CreditInspired — Mon, 08 Apr 2019 03:12:03 GMT

@Anonymous wrote:
To be honest, i would take the assumptions a step further and put forth that many many people out there do not PIF monthly and carry balances for extended periods with no AA taken as long as they make payments each month. I can tell you firsthand that for a long time I carried a substantial balance and only occasionally paid more than the minimum, and had exactly zero AA even then. We have to keep in mind that here at MF, we are the outliers. We do NOT represent the general population. We sweat UTI percentages, we analyze the angles on scoring, we (collectively, as in those who were here long before me - I was not part of it) figured out AZEO and app strategies and reporting plans and CLI angles to play. Joe Sixpack does not do this. He buys a TV on his card and makes payments on it monthly when it’s due while using his card to buy other things, and his balances report. You know what? Most of the time he’s just fine. His scores don’t nosedive, he can get a mortgage, he can get a car financed.

Do I think it’s better to do things the “MF Way”? I think so, both to minimize point loss but moreso to knock down the risk of a bad life event putting us into a hole that drives up our debt. They say the average household today has $8000+ in unsecured debt. I’ve recently dropped below $7000 and each month I continue to drop. Some cards may have increased UTI in a month-over-month case while others drop. (Spent $350 at Kohl’s on my card this weekend getting clothes for my daughters, and put two nights at a Hampton Inn on my HH Ascend card. Some portion of those expenditures may report. At the same time I paid Disco $500, $80 to Home Depot, and $75 to Target. This happens as often as not. Yet my scores do still improve, my UTI moves in a net lower usage direction each month, and my lenders not only haven’t taken AA despite balances, but several have granted CLIs even with UTI above the magical 28.9% barrier. Each month overall I owe a little less than I did the previous month, I never EVER miss a due date, and I never exceed a limit. I will echo the OP in saying these last three criteria I feel are what matters more than anything.

Ideally I would be at 8.9% aggregate and <28.9% individual. A few of my cards are already between 0 and 27%. Over the next few months some more will get there too. Eventually I will be in the sweet zone as well and my scores will fully reflect that. In the meantime, I focus on those three key points with a secondary goal of getting below 28.9%, but (speaking facetiously) I’m not chewing my nails to the quick trying to figure how in the heck I’m gonna knock $32 more of a card balance off by midnight so it doesn’t report 29.1%. It’s not necessary.

Ultimately, as stated by OP, each rebuilder comes to their own realizations about what they need to do. At the outset of a rebuild, nailing the percentages and watching scoring thresholds like a hawk is great - it will help you grow your scores and your credit faster than anything. When you’re established again, or well on your way as I am now (thanks to also adhering to the MF Way at the outset) you can relax a bit, sweat the extra points when an app is looming, and otherwise use, and let report, your cards more “real world” style and you’ll still be OK. I do still sweat points as I’m not fully rebuilt yet, but I don’t sweat it like I used to. No stagnant aggregate UTI, no missed payments or max UTI, and also no AA, no balance chasing, and no CLDs.

Re: FICO Phobias

thornback — Mon, 08 Apr 2019 03:41:30 GMT

@Anonymous wrote:
The reason to avoid carrying balances is not to improve one's FICO scores, since the FICO models can't tell whether you are carrying a CC balance. It's to avoid paying outrageously high interest rates, often in excess of 20%. A corrolary to carrying CC debt (on which one pays high interest rates) is that such a person typically has almost no money saved -- either in retirement savings or just a regular savings account. If he does, then he's choosing to pay high interest to CC companies in preference to getting 2% on a savings account, which reveals a different set of problems.

The exception of course is carrying a balance on a 0% card -- then the cardowner might have strong savings, which is fine.

ImTheDevil is right that Joe Sixpack often buys a lot on cards and makes minimum payments. Joe was also destroyed by the 2008 meltdown. He's destroyed in fact when he loses his job during a happy time for the economy, or if his wife loses her job, or if he has a kid with an unexpected challenge like autism. He will also likely be devastated in retirement, when he realizes Medicare and SS are not enough to support himself.

As far as AZEO, I have been thinking about creating a thread that tells a person everything he needs to know about it. I have certainly stayed on message every time that the subject comes up, namely that it gives you no help whatsoever in building a score over time, though it can be especially helpful shortly before an important credit app like a mortgage.

All of the above is valid - points well taken and I'm in agreement - there are many financially sound reasons to never carry a balance, just as there are several legitimate reasons to carry a balance - we can discuss that all day given the basis for each will generally rely heavily on circumstantial factors. This post was more about folks being leary of allowing a balance to report or carrying a balance (including during 0% periods) soley because of the concern that they may lose a few FICO points in the interim; this is pretty much meant to be irrespective of personal finance because, while financial conditions wildly differ and require examination on a case-by-case basis, score obsession, as well as its underlying reasoning, is an extemely common thread amongst (re)builders.

Re: FICO Phobias

thornback — Mon, 08 Apr 2019 03:45:16 GMT

@Anonymous wrote:
You all make some great points! I think some of these "phobias" that many of us have about credit are also due to the fact that we did NOT know how to manage our credit lives before. Now that someone tells us how, it's hard not to get obsessed about gaining (or losing) points.

I can't tell you how much I have learned from these forums, I wish I would have known this stuff 20 years ago. Thanks to all of you!!

This is so true. Seeing your score increase is thrilling - especially when it happens due to something you did - so when it drops, even if by only a couple of points, it can be quite heartbreaking and often feel like a setback even when, in the grand scheme of things, it's not.

Not to sound too much like a support group, but Thanks for sharing, Kathy!

Re: FICO Phobias

thornback — Mon, 08 Apr 2019 03:52:28 GMT

@CreditInspired wrote:
Thank you OP for outlining successful habits to adopt as we navigate the credit world.

I agree 100% with this analogy because for the last 2 years this was me—micromanaging my credit like crazy doing the AZEO method; and although my scores were beautiful (790-804), the process itself was driving me nuts.

So at the beginning of the year, I decided with my scores, it wasn’t going to matter if I had a 10-15pt drop, my scores were still in the range to get the best interest rate possible if I wanted to apply for another card and not worry about approvals.

So last month, I did 2 BTs and I almost had a heart attack when I did my weekly pull from CK and my EQ score had dropped 51pts and TU 44pts. I quickly rebound because I recalled I only use CK for monitoring. So I pulled my scores from CCT. Yes, there was a score drop for crossing 28.9% (went from 4% UT to 32% UT) and having 2 more cards reporting a balance. But it was only a drop of ~10pts, which will correct itself next month.

I’m much calmer now and I use my credit without micromanaging every aspect of it. AZEO definitely works when applying for a mortgage. NFCU LO told me my application was the easiest and cleanest one she had done in a really long time. I grinned from ear-to-ear, especially since I was a first time homebuyer.

Again, thanks, because this will indeed help newbies.

This is exactly the point I hope all (re)builders will reach one day. I think, in the beginning, everyone will obsessively monitor and manage - that's the nature of nurturing, right? But at some point, you have to let go just a little bit.. and that can be quite difficult.

Also -- great story about 'when & how' to use AZEO -- a mortgage app is the prime example of when it's worth taking the time to implement. (Dude! I would have been grinning ear-to-ear too if an LO had said that to me... that's awesome! ).

Thanks for chiming in!

Re: FICO Phobias

calyx — Mon, 08 Apr 2019 13:16:48 GMT

After some chatter in the Garden, I've been convinced to let things ride... for the most part.

My crazy micro-managing wasn't so much squeezing every point out of my score, but just because I am new to credit life. My ex went nuts and opened cards and wasted money and destroyed my credit score/profile even though, other than student/auto loans, I never used credit (heck, the only card I had was one from Mervyn's in the 90s). After clawing my way out of debt (that wasn't really mine), I'm just having a hard time with the thought that I have credit debt. In actuality, I don't - every penny is accounted for in my budget (I used a 0 based budget), so I can pay the cards at any time, but I do it relentlessly and pathologically. In fact, the only reason I previously let one card report a balance because of what I've read here in the forums.

So, I'm resolved to just let everything report naturally, not pay anything down between statements (except Disco, because I still have double-cashback and I'm putting most of my spend through it which is well above the CL). It should be interesting to see how things shake out. I have no goals or plans for the next while, as I don't have to worry about a mortgage and I just got an auto loan. With a new card with a high SL, I certainly don't need any more credit.

If you need me, I'll probably be sitting in a corner rocking myself in the next week or so

Re: FICO Phobias

Peazmom — Mon, 08 Apr 2019 14:16:01 GMT

@Anonymous wrote:
You all make some great points! I think some of these "phobias" that many of us have about credit are also due to the fact that we did NOT know how to manage our credit lives before. Now that someone tells us how, it's hard not to get obsessed about gaining (or losing) points.

I can't tell you how much I have learned from these forums, I wish I would have known this stuff 20 years ago. Thanks to all of you!!

100+ for me. As a "woman of a certain age", when I began my credit life I could not, by law, apply for credit in my own name. It had to be attached to my husband's credit file. So my credit health was dependent on his credit decisions...which were not always sound. Fast forward to divorce and financial independence...even as a college educated professional, I was in total credit ignorance. I thought the CRA's were akin to the Gods on Mount Olympus, play with us mere mortals for their personal amusement. I had no idea that my scores could be influenced by even small actions on my part. When I discovered this Forum a short while ago, I started getting an idea of how the credit world worked, but did not totally dive in until about 3 months ago. The idea that I could have some control based on balances, number of cards carrying balances, etc. has been eye opening and has appealed to my internal control freak. Positive results have occured in my file and I am learning new positive ways to handle my finances. On the downside...that internal control freak has been triggered to the point that I have become OCD when I deviate a point or two. So I thank you guys for not only educating me, but though this thread, showing me that I can let go of the OCD micro-managing, take a deep breath and just be responsible.

Re: FICO Phobias

Caught750 — Mon, 08 Apr 2019 15:41:26 GMT

Wow...This should be mandatory reading. So much to comment on.

In the last month or so I’ve had threads, commented on the following, or mused to myself over these topics; AZEO, Util, Cards Reporting Balances, Carrying Balances, Whether I am, in fact, Still Rebuilding, and Mortgages.

AZEO/Util; I used to use AZEO and I was a mess waiting for “the damage”the first month I allowed a second card to report. Holy crap, not a single point. I still keep my Util at 8.9% aggregate and 28.9% per card or less but if I exceed the single card I’ll let it report. If I exceed 8.9% aggregate I have a problem as this is like $8k and means I over spent (though I have savings to pay it). Funny, since I’ve stopped using AZEO my average starting limit has more than doubled on cards.

Cards reporting; I have yet to do this and I won’t exceed 33% but I think 4 cards will report with a balance this cycle. I bet nothing happens and the world will continue.

Carrying balances was another tough one the first time I let my Discover balance revolve. Nothing happened! I may have gotten a CLI even. I now have a balance on my BBVA card for auto repairs and I’m not having a meltdown.

Rebuilding is a tough one for me. I feel like one but lenders aren’t treating me that way anymore. I still get anxious but I allow things to report more naturally. I have only been denied by ONE bank (BoA) was which is funny when Chase approves me well over 5/24 and US Bank approves me at 4/6. My scores have climbed and my TCL is soaring, yet I still feel like a rebuilder as I have 6+ year old derogs reporting.

As for mortgages I will spend a year in the garden, I will implement AZEO a few months out, and my middle score will be over 740. Then I’ll act like a normal person instead of someone who learned to win at credit, because of ALL OF YOU at MF.

I know what to do and when but you’ve all helped me relax as much as you have made a neurotic, obsessive compulsive, mess. THANK YOU FOR THAT!

Re: FICO Phobias

Anonymous — Mon, 08 Apr 2019 18:07:41 GMT

@thornback wrote:
@Anonymous wrote:
The reason to avoid carrying balances is not to improve one's FICO scores, since the FICO models can't tell whether you are carrying a CC balance. It's to avoid paying outrageously high interest rates, often in excess of 20%. A corrolary to carrying CC debt (on which one pays high interest rates) is that such a person typically has almost no money saved -- either in retirement savings or just a regular savings account. If he does, then he's choosing to pay high interest to CC companies in preference to getting 2% on a savings account, which reveals a different set of problems.

The exception of course is carrying a balance on a 0% card -- then the cardowner might have strong savings, which is fine.

ImTheDevil is right that Joe Sixpack often buys a lot on cards and makes minimum payments. Joe was also destroyed by the 2008 meltdown. He's destroyed in fact when he loses his job during a happy time for the economy, or if his wife loses her job, or if he has a kid with an unexpected challenge like autism. He will also likely be devastated in retirement, when he realizes Medicare and SS are not enough to support himself.

As far as AZEO, I have been thinking about creating a thread that tells a person everything he needs to know about it. I have certainly stayed on message every time that the subject comes up, namely that it gives you no help whatsoever in building a score over time, though it can be especially helpful shortly before an important credit app like a mortgage.
All of the above is valid - points well taken and I'm in agreement - there are many financially sound reasons to never carry a balance, just as there are several legitimate reasons to carry a balance - we can discuss that all day given the basis for each will generally rely heavily on circumstantial factors. This post was more about folks being leary of allowing a balance to report or carrying a balance (including during 0% periods) soley because of the concern that they may lose a few FICO points in the interim; this is pretty much meant to be irrespective of personal finance because, while financial conditions wildly differ and require examination on a case-by-case basis, score obsession, as well as its underlying reasoning, is an extemely common thread amongst (re)builders.

Hi Thornback. You might have intended your first post to be solely about people worried about losing a few FICO points. I.e. at first you were talking about the issue of reporting balances.

But very early on contributor ImTheDevil expanded the discussion to include the question of carrying balances, and whether the forum advice to avoid doing so might be similarly misplaced. ITD writes:

"To be honest, i would take the assumptions a step further and put forth that many many people out there do not PIF monthly and carry balances for extended periods with no AA taken as long as they make payments each month. I can tell you firsthand that for a long time I carried a substantial balance...."

You then affirmed what he said by replying: "I completely agree with everything stated here." (I.e. stated in ITD's post.) So at that point in the discussion the two major contributors seemed to feel that carrying balances was something they wanted to talk about as well (and that they agreed with each other).

That's the point that I jumped in to explain that FICO scores were incapable of being affected by carrying balances, but that there were very good reasons to regard carrying balances as a serious problem -- on other grounds.

Hope that explains my comment better.

Re: FICO Phobias

Anonymous — Mon, 08 Apr 2019 18:27:18 GMT

CGID, you’re absolutely right that there are excellent reasons not to carry them. My only point about it, which perhaps I could’ve clarified better, was that should someone carry them, they will definitely pay more because of interest but apart from that, it’s not the end of the world by any means, and perhaps isn’t worth getting night sweats over. At times, most of us will have to carry non-0%-promotional balances and I only wanted to point out in the above excerpt that it isn’t the end of the world to do so, however less than ideal it may be.

Re: FICO Phobias

Anonymous — Mon, 08 Apr 2019 20:10:37 GMT

Yeah, sounds like there was just a misunderstanding. Since the initial post was about losing FICO points, it sounded like you were thinking that carrying balances does cause a scoring drop, but just not one worth worrying about. I was alerting you both that carrying balances in itself could not have any impact whatsoever on one's score. Rather, while the concerns that balance-carrying imply have nothing to with one's score, they might well imply far more serious issues than a scoring drop: e.g. little existing savings.

AZEO + ultralow utilization is a real nice score-boosting strategy. It really comes into its own in the 40 days before a mortgage preapproval, though it can have value before any important credit app. It gives no help in building credit over time, however, and that's the message we have to get out. All the veterans of these forums understand that (SouthJ, Revelate, BBS, Thomas Thumb, etc.) but somehow AZEO as a score building strategy has somehow taken on a life of its own, repeated by well intentioned but less knowledgeable people in the echo chamber of the forums.

Actually what people really need to understand is the absolute fundamentals of how FICO scoring works. If they understood that, then they would realize that CC balances affect the score at an instant, and as soon as they change, the score changes -- and thus AZEO necessarily only has practical value in the immediate run-up to an important credit app. It's these fundamental concepts that people would benefit from grasping -- the misunderstanding about AZEO is a symptom of not understanding the deeper more fundamental stuff.

Re: FICO Phobias

thornback — Mon, 08 Apr 2019 20:27:38 GMT

@Anonymous wrote:
@thornback wrote:
@Anonymous wrote:
The reason to avoid carrying balances is not to improve one's FICO scores, since the FICO models can't tell whether you are carrying a CC balance. It's to avoid paying outrageously high interest rates, often in excess of 20%. A corrolary to carrying CC debt (on which one pays high interest rates) is that such a person typically has almost no money saved -- either in retirement savings or just a regular savings account. If he does, then he's choosing to pay high interest to CC companies in preference to getting 2% on a savings account, which reveals a different set of problems.

The exception of course is carrying a balance on a 0% card -- then the cardowner might have strong savings, which is fine.

ImTheDevil is right that Joe Sixpack often buys a lot on cards and makes minimum payments. Joe was also destroyed by the 2008 meltdown. He's destroyed in fact when he loses his job during a happy time for the economy, or if his wife loses her job, or if he has a kid with an unexpected challenge like autism. He will also likely be devastated in retirement, when he realizes Medicare and SS are not enough to support himself.

As far as AZEO, I have been thinking about creating a thread that tells a person everything he needs to know about it. I have certainly stayed on message every time that the subject comes up, namely that it gives you no help whatsoever in building a score over time, though it can be especially helpful shortly before an important credit app like a mortgage.
All of the above is valid - points well taken and I'm in agreement - there are many financially sound reasons to never carry a balance, just as there are several legitimate reasons to carry a balance - we can discuss that all day given the basis for each will generally rely heavily on circumstantial factors. This post was more about folks being leary of allowing a balance to report or carrying a balance (including during 0% periods) soley because of the concern that they may lose a few FICO points in the interim; this is pretty much meant to be irrespective of personal finance because, while financial conditions wildly differ and require examination on a case-by-case basis, score obsession, as well as its underlying reasoning, is an extemely common thread amongst (re)builders.
Hi Thornback. You might have intended your first post to be solely about people worried about losing a few FICO points. I.e. at first you were talking about the issue of reporting balances.

But very early on contributor ImTheDevil expanded the discussion to include the question of carrying balances, and whether the forum advice to avoid doing so might be similarly misplaced. ITD writes:

"To be honest, i would take the assumptions a step further and put forth that many many people out there do not PIF monthly and carry balances for extended periods with no AA taken as long as they make payments each month. I can tell you firsthand that for a long time I carried a substantial balance...."

You then affirmed what he said by replying: "I completely agree with everything stated here." (I.e. stated in ITD's post.) So at that point in the discussion the two major contributors seemed to feel that carrying balances was something they wanted to talk about as well (and that they agreed with each other).

That's the point that I jumped in to explain that FICO scores were incapable of being affected by carrying balances, but that there were very good reasons to regard carrying balances as a serious problem -- on other grounds.

Hope that explains my comment better.

Carrying balances is still reporting a balance. And many fear carrying balances becuase it will report a balance continously until paid off... and this could mess up their util / # of cards reporting a balance (for a number of reasons - some of which stem from their financial condition). For example -- a high BT balance may take months to pay off, and is therefore, carried, which means that the util on that card (and maybe even overall) will be higher than normal (if even only 25% or 30%) for that time --- and this can make some needlessly nervous. I read @ImTheDevil's response as one made with an effort to soothe this nervousness - as there was no mention of how carrying a balance may affect one's finacial well-being in the long run.

That said, I immediately understood why you made the comments you made because a mention of balance carrying can certainly open a door to financial fitness; I mean - my own original response to @ImTheDevil included mention about taking advantage of 0% promos and perhaps adding a low APR card to one's portfolio should the need to carry a balance arise so they could save money. I then deleted that portion of my response because I suddently realized it could cause the conversation to veer off into a topic about financial health and I wanted to avoid that, if possible. Then I read your post... and I got sucked in again and wrote like 4 paragraphs in response to a few of the statements you made about Joe Sixpack and the 2008 meltdown and I HAD TO STOP MYSELF AGAIN - delete all of that, and, instead, try to steer the topic back to how we obsess over FICO points -- because your post sparked a whole new lot of something to talk about (which is wonderful, btw).

That's all, I wasn't 'scolding' you or anything of the sort -- I've seen other threads that have gone off on tangents and were ultimately, essentially, shut down by moderators because of it (and I don't start threads often so I didn't want that happening here if it could be avoided).

So... would I love to have a conversation about the financial impact of carrying a balance -- absolutely -- I think it would be worthwhile and you or @ImTheDevil should start a thread so we can all respond and continue the analysis about what happened to Joe Sixpack, his credit card balances, and presumed need to file bankruptcy when the 2008 financial crisis hit...