@Pppoolboy, disagree all you want, there are many here with a great deal of anecdotal and empirical evidence which proves beyond a doubt your assertions are just flat wrong. Continuing to double down on your flawed claims does not reflect well on you and will lead the rest of us to ignore you entirely as a troll or a bot of some sort.
When FICO insiders were asked in this forum to explain the rationale for the all-zero penalty and the no-open-loan penalty, their explanation was as follows:
The data shows that having 0% utilization is slightly riskier than having a low utilization. Having low utilization is an indication that you have credit and are using it responsibly.
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...
The data shows that going from low installment loan utilization to no installment loan balances reported (and thus 0% installment loan utilization) is slightly more indicative of future risk.
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...
Having a low installment loan balance to loan amount ratio is considered slightly less risky than having a 0% installment loan ratio.
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...
Having a low mortgage loan balance to loan amount ratio is considered slightly less risky than having a 0% mortgage loan ratio.
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...
Analysis on millions of credit files indicates that there is more risk associated with those with zero balance than those with small balances. So, the FICO Score considers consumers with a small balance more favorably than those with zero balance.
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score...
You can believe those explanations if you like.
From the reports in the forum, and from my own experience, the all-zero penalty carries a penalty of 22 points, and the no-open-loan penalty carries a penalty of approximately 32 points. If you believe that among all those people who have a positive reported history of repaying all of their debts on a timely basis, those who have paid off all of their loans and all of their credit card debts are 54 points riskier than those who have not.... I have a bridge in Brooklyn I'd like to sell you.
@Pppoolboy wrote:Sorry guys, I'm going to disagree with your disagreement LOL. It's the only rational explanation. Otherwise it's just people ranting about "They punished me because they can't make money off me!!!!111"
If you have a better theory, I'm all ears! No one has ever come up with one. Thus, Bucky's stands.
The idea -- that your risk score has some profit-making tweak that drops the score in certain circumstances because it appears you're not carrying a balance and are therefore possibly less profitable to lenders -- is utterly absurd.
that's because it's not doing that.
FICO 8/9 scores drop when all revolving accounts read a $0 balance and FICO 8/9 scores go up when there is one revolving account reporting a nomial balance.
This is because FICO identified a slightly higher risk profile in people not using their revolving accounts compared to those using their revolving accounts. They have the history of a bunch of people and how they use credit and I'm sure some higher percentage of people end up charging off accounts if they start from all of their balances being $0 than if they had at least one card reporting a balance in a given month. There's no other explanation for repeatable, predictable, obvious point jump being so drastic and noticable across hundreds of DPs on this forum and others.
This has nothing to do with carrying balances or paying interest. Reporting a balance isn't carying a balance.
Assuming 4 accounts:
Revolving Balances:
$0, $0, $0, $0 will have a score of 700 whereas $0 $0, $0, $20 will have a score of 720.
As the person above me wrote, one's payment and balance history is on the report itself. Lenders can factor that into their profit-making and underwriting by looking at the report directly, if they so choose. They don't need the score to take it into account.
