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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.
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.
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:
And let's eliminate the fear of NOT consistently adhering to the following:
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...
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.
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.
@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).
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.
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.
@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.
@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.
+1