Confusing utilization datapoint

[Anonymous]

ETA: Sorry, this probably should have been in the Understanding FICO Scoring forum.

Although it's not relevant to my current situation (I'm now applying AZEO), I was studying the effects of card balances and began looking through my experian credit reports from last year and noticed something I find very odd. A score drop of 14 points that doesn't make sense to me because of a utilization change. 

I am 99% certain that there was no other reason for the score drop. No new items were added, removed, or updated and no thresholds were crossed that could have caused a drop. All percentages and balances are listed as reported by Experian.

Score on January 15:

648

4 cards with the following limits, balances, and utilization:

Card 1: $500 credit limit

$500 balance (100% utilization)

Card 2: $500 credit limit

$7 balance (1% utilization)

Card 3 (AU): $10,000 credit limit

$45 balance (<1% utilization)

Card 4: $200 credit limit

$199 balance (99% utilization)

The following day, Card 3, the authorized user card, reported a zero balance:

Card 3 (AU): $10,000 credit limit

$0 balance (0% utilization)

My score dropped 14 points to 634 as a result. 

Why would going from no cards at zero balance, 2 at 99%-100% usage, and 2 at very low useage but not zero, to having a card at 0% useage, drop my score? I thought FICO liked seeing at least some cards at zero!

I'm puzzled and feel like this presents a learning opportunity for me. Very confused that the drop from $45 to $0 caused a score drop. I'd understand it if I went from AZEO to all cards at zero but I didn't. I still had a card at very low balance and 2 with high balances, so I would have thought that lowering one to zero would have boosted the score, not dropped it.

For reference, at the time my profile had 2 derogatories: a 4 year old paid charge off and a 3 year old paid collection. 

Any insight or speculation will be very appreciated. Does this have ramifications for AZEO? Is it possible that having too many cards at zero balance isn't optimal?

[K-in-Boston]

Where did you see the change (Experian, CCT, myFICO, etc.) in score?  Some monitoring front-ends are notorious for showing score changes happening at different times than the event that caused it.  

As we can see from these examples, if I simply add $289,640 in additional revolving debt, I should gain 10 more points on TransUnion, but if I pay off $4,000 of revolving debt, my EQ score will fall to 503.  

When I had Credit Check Total, on the day of the month when I would pull all 3 scores, the Experian score would often be different than alerts showing a new score the same day as well.

[thornback]

There is a theory that AU cards have their own All Zero penalty.   So allowing all AU cards to report $0, whether or not primaries are reporting a balance, will result in the same All Zero penalty as having all of one's primary cards report $0.  

We don't have a ton of data points on this -  but there are several threads which suggest that a separate All Zero penalty exists for AU accounts. 

@Anonymous also mentioned it in his General Scoring Primer thread (post 3 of the thread -- but the entire thread is worth reading): 

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/General-Scoring-Primer-and-Version-8-Master-Thread-rev-5-17-20/m-p/6023348

So,  assuming the theory is accurate,  for you to have the AZEO scoring benefit,  you'd need to have all but one of your primary accounts report $0, with the one primary and your AU reporting a small balance.  The only way to know for sure is to test it on your profile.

[Anonymous]

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@thornback wrote:

There is a theory that AU cards have their own All Zero penalty.   So allowing all AU cards to report $0, whether or not primaries are reporting a balance, will result in the same All Zero penalty as having all of one's primary cards report $0.  

We don't have a ton of data points on this -  but there are several threads which suggest that a separate All Zero penalty exists for AU accounts. 

@Anonymous also mentioned it in his General Scoring Primer thread (post 3 of the thread -- but the entire thread is worth reading): 

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/General-Scoring-Primer-and-Version-8-Master-Thread-rev-5-17-20/m-p/6023348

So,  assuming the theory is accurate,  for you to have the AZEO scoring benefit,  you'd need to have all but one of your primary accounts report $0, with the one primary and your AU reporting a small balance.  The only way to know for sure is to test it on your profile.

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Fascinating, thank you so much! That surely explains it. Unfortunately I can't test it since I'm no longer an AU on any cards, but it makes sense to me that this would be the cause. Just when you think you know everything, you learn something new!

[Anonymous]

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@K-in-Boston wrote:

Where did you see the change (Experian, CCT, myFICO, etc.) in score?  Some monitoring front-ends are notorious for showing score changes happening at different times than the event that caused it.  

As we can see from these examples, if I simply add $289,640 in additional revolving debt, I should gain 10 more points on TransUnion, but if I pay off $4,000 of revolving debt, my EQ score will fall to 503.  

When I had Credit Check Total, on the day of the month when I would pull all 3 scores, the Experian score would often be different than alerts showing a new score the same day as well.

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It was on experian.com.

[thornback]

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@Anonymous wrote:

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Fascinating, thank you so much! That surely explains it. Unfortunately I can't test it since I'm no longer an AU on any cards, but it makes sense to me that this would be the cause. Just when you think you know everything, you learn something new!

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haha... I learn something new on this forum just about every day...   FICO is certainly a fascinating beast and I don't think we'll ever know everything about it...  but folks like yourself posting these odd scoring instances opens the door for us to learn much more. 

I have an AU but I have zero control over the balance that's posted on that card each month -- been an AU on one of my parents' accounts forever; they look at me like I'm crazy when I ask them to "help me test FICO" lol...  they pay that account in full each month on the due date so there's always a balance reporting and there's no way they're going to change their 50+ year payment habits just so I can post a data point -- ¯\_(ツ)_/¯ .

But -- I do know, regardless of the balance on the AU account, I am able to get the AZEO scoring benefit with my primary accounts.   

[K-in-Boston]

I really don't think such a small (positive) change on an AU account could possibly cause that large score drop while having the other balances.  Do you have scores and utilization prior to and after these two scores?

[CaptJOB]

I've been working on DWs credit as she has a ~4ish year old 90 day late. Have her set up as an AU on a Chase card which is nice since I have a lot of control when it comes to experimenting. Having it report a zero balance causes a 13-14 point score drop. Seems to be pretty consistent.

[thornback]

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@CaptJOB wrote:

I've been working on DWs credit as she has a ~4ish year old 90 day late. Have her set up as an AU on a Chase card which is nice since I have a lot of control when it comes to experimenting. Having it report a zero balance causes a 13-14 point score drop. Seems to be pretty consistent.

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That seems to be the average # of points lost based on data points offered by those who have experienced this.

[Anonymous]

You can believe that’s exactly what it was, the AU AZ penalty. And what that proves is that that the AU card was counting on fico 8 and 9 for your profile. It was not flagged by the anti-abuse algorithm.

That’s exactly how you test to see whether or not the anti-abuse algorithm is flagging it. If it were, you would’ve seen no score change and it would have no effect on your version 8 and 9 scores. But since it was counting it would have affected your scores. Keep in mind they always count on the mortgage scores.

And it’s not a theory it’s been confirmed by multiple people.