QUESTION: Equifax FICO "HIGH balance" versus "RECENT balance" (UTI calculation)

[I_SUFFER_FROM_FICO_ENVY]

I understand, now, that the "CC recent balance" (at time of statement) is reported to the CRA and  is calculated into the UTI.

QUESTION...

...does the "HIGH balance" ever factor into FICO scoring.  Let me give you an example...

I have four CC with a COMBINED credit of 10,000.  Today, two of my CC are reporting $0 RECENT balance from last statement; two of the others are reporting RECENT balances that are quite high UTI>70%.

ALL FOUR of these CC accounts, though, ALSO report what my HIGHEST balance was (in the past). 

1) Does this factor into FICO scoring

2)  and if not, why is it there?  Is it just for prospective lenders to see?

3)  and, how long does it stay there?  If my HIGHEST balnce in the past was MAXIMUM, does that show indefinitely?

Thanks, as always.

[Anonymous]

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@I_SUFFER_FROM_FICO_ENVY wrote:

I understand, now, that the "CC recent balance" (at time of statement) is reported to the CRA and  is calculated into the UTI.

QUESTION...

...does the "HIGH balance" ever factor into FICO scoring.  Let me give you an example...

I have four CC with a COMBINED credit of 10,000.  Today, two of my CC are reporting $0 RECENT balance from last statement; two of the others are reporting RECENT balances that are quite high UTI>70%.

ALL FOUR of these CC accounts, though, ALSO report what my HIGHEST balance was (in the past). 

1) Does this factor into FICO scoring

2)  and if not, why is it there?  Is it just for prospective lenders to see?

3)  and, how long does it stay there?  If my HIGHEST balnce in the past was MAXIMUM, does that show indefinitely?

Thanks, as always.

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1) It does not factor into FICO scoring unless the credit line does not show a limit and under that particular FICO model wants to take the credit line's utilization into account.  In that case, the high limit is used as your card balance instead.  Installment loans is an easy example.  Charge card until FICO 98 models is another.  Visa sig. with no limit showing is another under all FICO models.

2) Yes it is there for prospective lenders to see.  There is a lot of additional information there as well such as monthly balances etc.  It is unclear where this information is used outside of a manual review.  However, remember there is more going on when you app for new credit.  Potentially, they are using these additional numbers for their internal scoring or being used for to calculate initial credit line.

3) High Balance is something reported by the lender.  So it is going to vary.  Some report the High Balance at any time and some report high balance of statement date.  Some go back 6 months and some go back 1 year.  Not sure if it is longer.

[drkaje]

IMO, it's there to add value to their product in cases where for manual reviews are done. Though not factored into FICO scores; the information shows companies payment/spending/debt patterns, pyramiding, and even reveals cases where CLs were slashed.

The information is likely vaulable for internal scoring models.

[pizzadude]

High balance does not factor into your FICO score.    It is an informational field that just records the highest balance you have ever had on the card.   Creditors who pull your report can see it, along with any other fields.  

It's just the highest balance that you have had, it remains there on your reports until you hit a higher balance at some point.

[Anonymous]

*COUGH* I still think my comments were more accurate

[drkaje]

It's also a great way to see how much credit we've used or paid interest on!

[Revelate]

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@drkaje wrote:

It's also a great way to see how much credit we've used or paid interest on!

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+1  Personally I think this is more important than people let on, or at least demonstration that the card has been fully used with maybe interest paid or maybe not.

Cards aren't profitable (outside the possibly AF) for lenders unless you're using them, which is why I pay for everything I possibly can with a card.  Ran into a situation where I needed cash to get out of a parking structure, that would've been embarrasing if not for the spare $20 I kept in the car, but other than that it's been a non-issue.

On the other hand there's going to be a comparison between your high balance and your current balance, which I'm not absolutely certain that FICO ignores, but it's an absolute surety that the lenders won't make, and this is just the most simplistic calculation.  Much like Drkage pointed out, if your current balance = high balance, you're at your most extended, and that's not a good customer to be granting unsecured credit to.  Also, if someone ran up 1997/2000 and then paid it back and is now at 34/2000, statistically it's known they can handle their current level of credit and lenders will push their bets a little more to maximize your utilization (and therefore their profits) if they feel it's a bet within their risk tolerance.

Besides, and this is an utterly cynical point: FICO is not only a risk analysis algorithm, it's also a profitability one.

[Anonymous]

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@Revelate wrote:

 

Besides, and this is an utterly cynical point: FICO is not only a risk analysis algorithm, it's also a profitability one.

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Actually, there is a different scoring model for profitability although they all use your credit report.  FICO is predictive of likelihood of default in next 2 years (or something like that).  The Bank Score Card or "sucker" score on the otherhand tries to measure your value to the lending institution.

[Revelate]

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@Anonymous wrote:

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@Revelate wrote:

 

Besides, and this is an utterly cynical point: FICO is not only a risk analysis algorithm, it's also a profitability one.

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Actually, there is a different scoring model for profitability although they all use your credit report.  FICO is predictive of likelihood of default in next 2 years (or something like that).  The Bank Score Card or "sucker" score on the otherhand tries to measure your value to the lending institution.

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That's interesting, I thought the Credit-enhanced industry option (or bankcard score if you will, I thought they were the same) was to measure well, "risk" with a heavier weighting on revolving credit than mortgage / auto / installment loans.  This would at least make sense somewhat, as I know I'll keep making my payments on a house (except perhaps in CA in a declining market if I've never done a cash-out refi in order to qualify for their walk away clause) and let everything else burn if I have to.

Since all lending is a risk vs. reward calculation, is why I made the cynical statement, and it's really no different for an installment loan of any type (well, excluding loan origination for conventional mortgages), but what have you heard / seen differently on that?  Or is the Credit enhanced industry option vs. Bankcard score two different things?

Edit: I'm not positive on that 2 year default analysis: otherwise they would've had multiple algorithm types for a very long time since by definition loans have different terms, and they didn't even introduce a Mortrgage-enhanced industry option until '08?  Seems like a pretty large oversight for a bunch of people who are way smarter than I am from when FICO was introduced to now.