@Horseshoez wrote:I'm relatively new to this site and just encountered the AZEO concept within the last week. I've read numerous posts on the subject and, I guess I'm being a bit thick as I do not understand the benefit of AZEO versus using say, three cards, each of which reports a tiny balance on their associated statements.
In my case, I will hit my 1-year mark from a Chapter 13 discharge this week and, so far at least, I only have two credit cards, TDCash Rewards (3% Dining, 2% Groceries, and 1% everything else) with a $5,000 limit, and a CapitalOne Quicksilver (1.5% cash back on everything) with a $3,000 limit. Given I typically charge upwards of three to four thousand dollars per month on "stuff" and the relative differences in the rewards, I use both cards to their best advantage which in turn yields some nice cash rewards. I then pay them in full prior to the next due date; said another way, both cards may or may not show a balance of anywhere between $0.00 and maybe $200.00 or so from charges made between the posting of my payment and the cutting of the next statement.
Circling back to my confusion, I'm having a hard time understanding how practicing AZEO versus say, having statements of say, $120 and $46 (TDCash and Quicksilver respectively) will make any difference.
You aren't missing the point. The communication of AZEO is a shorthand to get people to have low utilization on all of their cards. By specifying that one card must have a small balance, that avoids the points penalty if someone goes hog wild and zeros all their cards.
You will get some opinions that having two of two cards reporting balances could give a small points penalty, but since the rewards are so different in your cards, I doubt that would be significant.
Keep paying your cards down prior to statement, with a small balance to get low utilization and you will be doing it right.
@SouthJamaica wrote:
As I said above:
"With some scoring models, notably FICO 8's, the difference between 2/14 reporting small balances and 1/14 reporting a small balance won't mean anything at all.
With some scoring models, notably the mortgage scores, the difference might mean 6 or 7 points. Or might not."
Okay, forgive me, I do not know what the notation "2/14" and "1/14" means; as I mentioned, I'm new to this site.
@Horseshoez wrote:I'm relatively new to this site and just encountered the AZEO concept within the last week. I've read numerous posts on the subject and, I guess I'm being a bit thick as I do not understand the benefit of AZEO versus using say, three cards, each of which reports a tiny balance on their associated statements.
In my case, I will hit my 1-year mark from a Chapter 13 discharge this week and, so far at least, I only have two credit cards, TDCash Rewards (3% Dining, 2% Groceries, and 1% everything else) with a $5,000 limit, and a CapitalOne Quicksilver (1.5% cash back on everything) with a $3,000 limit. Given I typically charge upwards of three to four thousand dollars per month on "stuff" and the relative differences in the rewards, I use both cards to their best advantage which in turn yields some nice cash rewards. I then pay them in full prior to the next due date; said another way, both cards may or may not show a balance of anywhere between $0.00 and maybe $200.00 or so from charges made between the posting of my payment and the cutting of the next statement.
Circling back to my confusion, I'm having a hard time understanding how practicing AZEO versus say, having statements of say, $120 and $46 (TDCash and Quicksilver respectively) will make any difference.
@Horseshoez There is a number of cards with a balance metric that rewards points for the number of cards with a balance being less than 30%. The rewards are very profile specific and mortgage scores are the most affected by the number of cards reporting a balance.
In your case, you will not reap the benefits of azeo with only 2 cards because you can never reach below the 30% threshold. With 1 of only 2 reporting, the best you can do is 50% reporting a balance so your score change between 1 and 2 cards reporting is probably nominal.
All that said, AZEO is most beneficial when preparing to app for something significant- like a mortgage or other large, long-term loan - to squeeze out every possible point available in effort to reach a top-teir interest rate.
It is certainly not necessary to do AZEO all the time as any score gains are a one-time boost (it does not build upon itself month-month) and must be maintained- once you stop azeo those reward points are lost.
Managing azeo also means you have to pay before statement closing so cannot take advantage of the 30 day grace period offered by lenders to pay your bill... The micromanaging aspect of constant azeo can get old - fast. But rebuilders like it because for them, understandably, every point counts. Folks will usually eventually relax a bit as their credit profile improves.
i always recommend people try it at least once just to understand how to implement it and see how their scores respond - this way it can be used as a tool to optimize scores in the future, if/when needed. Keep it in the back pocket, sort to speak.
I personally don't use azeo; I have up to 5 cards reporting a balance at any given time and my scores are just fine and my lenders don't seem to mind (but my util is also in check). But if I wanted to app for a loan I'd use azeo if a few extra points would get me a better rate - I know I can get about 5 -7 points out of FICO 8/9 and and 9 - 11 points on older FICO models.
@Horseshoez wrote:Okay, forgive me, I do not know what the notation "2/14" and "1/14" means; as I mentioned, I'm new to this site.
2 out of 14 cards reporting a balance
1 out of 14 cards reporting a balance
The 14 cards is based on the original posters profile.
Thanks @thornback, makes more sense now.
A few comments:
- I pay my balances in full prior to the due date, just as a matter of course, the 30-day grace period is effectively irrelevant to me.
- Our plan is to start house hunting early next year with an eye to my Chapter 13 falling off my record next March, so we will in fact be applying for one of those "long-term loans" you spoke of.
- Per advice I've gleaned from this site, my current plan is to apply for a "Share Loan" from PenFed and a third credit card (leaning toward a Discover IT for this one), and then garden for a year.
@Horseshoez wrote:Thanks @thornback, makes more sense now.
A few comments:
- I pay my balances in full prior to the due date, just as a matter of course, the 30-day grace period is effectively irrelevant to me.
- Our plan is to start house hunting early next year with an eye to my Chapter 13 falling off my record next March, so we will in fact be applying for one of those "long-term loans" you spoke of.
- Per advice I've gleaned from this site, my current plan is to apply for a "Share Loan" from PenFed and a third credit card (leaning toward a Discover IT for this one), and then garden for a year.
*You pay your balances in full prior to your due date so that 30 day grace period is absolutely relevant to you because you use it. Your due date is the expiration of your grace period. AZEO requires you to pay prior to your grace period beginning (before your statement for the current billing cycle closes) so you can control the balance reported to the bureaus.
Solid plan to app for a 3rd card - just be sure to give yourself a full 12 months of no new accounts before apping for your mortgage.
The SSL is only needed if you currently have no active installment loans reporting. If you have an active auto, student, personal loan, etc., you do not need to add another loan.
@thornback wrote:
The SSL is only needed if you currently have no active installment loans reporting. If you have an active auto, student, personal loan, etc., you do not need to add another loan.
Yup, understood; I left college back in 1980 with no student loans and I have no other loans regardless of type; I'm still driving my long since paid off "bankruptcy car", and while it is 15 years old and has 170,000 miles on it, the car is still in excellent condition and would be almost impossible to replace. Why? Well, I am a stick-shift bigot, and finding a modern mid-sized semi-luxurious 4-door sedan with good performance with a manual transmission is, to put it mildly, exceedingly difficult. So, my 2006 Acura TL 6-Speed will be my car for, heck I don't know, maybe another decade. 