AZEO and Mortgage App

Anonymous · ‎01-23-2018

This may be a dumb question but when applying for a mortgage should all credit cards be paid to zero? I have been doing AZEO prior but maybe should pay my Amex to zero (I've been keeping it at around $700.) Would my mortgage fico scores take a hit or do they not really respond that much to AZEO? I'm probably overthinking. Thanks!

Anonymous · ‎01-23-2018

The AZEO strategy (All Zero Except One, with the remaining card reporting a small balance) works for all FICO models. You mention that your remaining card is an Amex. If that Amex is a charge card, you are likely incurring a scoring penalty. You want the remaining card to be:

(a) a true credit card (not a charge card)

(b) a card in your name (not an AU card)

(c) one with a balance of at least $5 but otherwise small (e.g. $15)

(d) one with a credit limit of < 29k

While many of us do not worry about AZEO for our day to day FICO 8, a mortgage is probably the most expensive loan you'll ever take out, so it makes sense to definitely use it for the mortgage models.

Actually, the mortgage models are more likely to reward you for seeing exactly one positive CC balance and several zeroes than will FICO 8.

Anonymous · ‎01-23-2018

It's the Delta Platinum Amex, I think it is a credit card. I have a 18,000 credit line. If not I can switch and use a Chase or BOA card instead. I just like the miles, I fly Delta a lot.

Subexistence · ‎01-23-2018

@Anonymous wrote:

(c) one with a balance of at least $5 but otherwise small (e.g. $15)
(d) one with a credit limit of < 29k

Why at least $5? Do credit limits over 29k not count for utilization?

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Anonymous · ‎01-23-2018

@Subexistence wrote:
@Anonymous wrote:

(c) one with a balance of at least $5 but otherwise small (e.g. $15)
(d) one with a credit limit of < 29k
Why at least $5? Do credit limits over 29k not count for utilization?

Ultrasmall balances can be forgiven. The BOA Better Balance Rewards card will sometimes zero out a balance as high as $3 (I think DoC may have found cases as high as $4). Other issuers do that too, depnding on the product. It's just simpler, when a 300k mortgage is at stake. to be 100% certain that neither FICO nor the creditor will treat a tiny balance as $0. $5 seems to be a very safe number.

Credit cards with a very high CL are excluded from consideration (regarding utilization and similar factors) by the older mortgage models. Where that line is drawn is not 100% clear, but it appears that any card with a CL of < 29k is very safe. Best guess is that it begins at 34.9k.

Anonymous · ‎01-23-2018

@Anonymous wrote:
It's the Delta Platinum Amex, I think it is a credit card. I have a 18,000 credit line. If not I can switch and use a Chase or BOA card instead. I just like the miles, I fly Delta a lot.

It appears to be a credit card, from what I can see by googling it. It's important to know the key defining features of any card you have (is it charge or credit, what is my credit limit, etc.)

It sounds like you might be under the impression that if you have a card that is reporting $0, then you can't be using it. You can actually use a card a lot and have it report $0 -- ask any of the folks on the forum how if that is unclear. A number of people will be glad to explain.