Strange VS3 scoring

[Anonymous]

I came across an interesting quirk the other day using the VS3.0 Credit Score Simulator.  I recently paid off all my credit cards and all of them have a $0 balance (and this is reflected on all of my CBRs).  In looking at the site (both Credit Karma and Nerd Wallet sites) it showed that if I increased my available credit limit by $10000 I would see a 74 point increase in my score.  I was puzzled when I saw this as my utlization would still be 0% yet I would see a huge jump in my score.  Opening a new CC with the same limit (understandably) would have the same effect.  So, I dug a little deeper and after playing with the numbers I discovered an actual single dollar difference that would make my score go up 0 points ot 74 points (just for reference and not actual numbers, I discovered that if I increased my available credit by $5999 I would get no bump, but if it was $6000 it would be 74 points).  It doesn't quite make sense to me, but I figured I would reach out and see if somone might know about something I may be missing why this would be the case.  Also, I am very curious (if this point bump is accurate) if it would have a similar impact on my actual FICO2, 4 and 5 scores.  That kind of bump would have a significant impact on the types of mortgages for which I would be eligible.  Thanks!!

[Anonymous]

Great question... and welcome to the forums!

There are really two issues involved.

(1)  Supposing one fixes on a very particular scoring model (Vantage 3.0, FICO 8 Classic, whatever).  How accurate are the claims of simulators about what changes to your credit profile will do to your score in that model?  In brief, how reliable are simulators... no matter what model they are claiming to simulate?

(2)  Suppose a given change to your profile will have a specific definite change to your Vantage Score.  (Suppose the simulator was right.)  How likely is it that a different model would behave the same way (especially if you are crossing from Vantage to FICO)?

Answers:

(1)  Simulators are often very unreliable.

(2)  There is a very weak ability to infer changes from one model to another, especially Vantage to FICO.

Specifically, no FICO models give you any scoring benefit for having bigger credit limits.  FICO cares a lot about utilization but not about the dollar value size of the CL itself.  EXAMPLE:

Bob has four credit cards.  Each has a $500 limit.  His CC utilization is 4%.  His creditors decide to give him a huge credit limit increase and the next month his CLs are 20k each.  Nothing else on his reports changes.  His FICO scores will not change by even a single point.

[Anonymous]

Thanks CreditGuyInDixie.  I appreciate your feedback.

[Anonymous]

To piggy back off of what CGID said, any simulator that suggests a score increase from simply adding additional total available credit is basically BS. If your current utilization is high, it's possible that adding another credit line could lower that utilization across a threshold and result in a slight gain, but it wouldn't be 70+ points.

[rmduhon]

If all of your cards are reporting a zero balance then you are getting penalized. Let 1 card report a $10-15 balance to avoid this.

[Anonymous]

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@rmduhon wrote:
If all of your cards are reporting a zero balance then you are getting penalized. Let 1 card report a $10-15 balance to avoid this.

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I can't believe I missed this.  Nice catch.

Yes, as Rmduhon observes, both Vantage 3 and FICO will penalize you if all cards report $0.  That's different from what you asked about, but it's a very helpful tip to improve your score.

[rmduhon]

Thanks CGID. I didn't comment in the question itself because you and BBS had that covered.

[Anonymous]

Just one card?  Also, why does having a $10-$15 balance improve my score and what kind of bump should I expect?  Obviously not an exatc amount, but a ballpark figure.

[Anonymous]

Yes, just one card.

I think the penalty most people report experiencing is 20 points or so.  Perhaps someone else on this thread knows better?

The penalty for all cards at $0 is because it looks to a credit scoring algorithm as though you don't use your cards at all.  FICO needs to be able to distingusih Fred, who has no derogs because he's not used his cards in five years, from Bob, who has no derogs because he's very responsible at paying and managing his cards.  For most of the credit bureaus' history, they only gave FICO the most recent snapshot of a person's profile, so FICO had no way to distinguish Bob from Fred if on a given month they both had all cards at $0.  The only way for Bob to show that he knew had to manage cards is to report a balance on one.

Future models will likely incorporate what is now called trended data and the model will be able to see what a person's payment and use history has been like over many months, not just the last month.  

[Anonymous]

The roughly 20 point hit for all zero balances that CGID estimates is pretty spot on. It can vary some from profile to profile, but on my profile it was a hit of 16-22 points to my FICO 08 scores depending on the bureau.