Credit Cards and FICO scoring silliness: "too many accounts with balances"

[Anonymous]

I have 5 credit card accounts. I am trying to keep all of them active, i.e. I even charge a little amount to the two that are not my main spending cards.

FICO will punish you for what they call "too many accounts with balances." I see the point in reducing the score. However, why would that matter for actual risk assessment if the balances reported on all accounts are so tiny?

It is a nuissance to pay off accounts to have them report $0 before the statement cuts. You have to watch the statement date and then not use the card for a couple of days. FICO reduced my score because I have balances on four out five credit card accounts.

The four reported balances are: $225, $26, $100, $80

My overall credit line for all cards is $38,000. Current utilization is at about 1%.

I don't consider this "real" debt that would tell a creditor that I am a risk. My score dropped from EQ 759 to 748. Conversely, if I owed the same or even a higher amount on two or one card, my score would be higher for no real apparent reason.

I think the risk factor of "too many accounts with balances" makes absolute sense when someone owes a substantial amount. However, with these piddly amounts, it is just silliness. FICO scoring should be able to recognize the difference between high balances on too many accounts and small balances on accounts.

The upshot is that FICO scoring is really "just a number" and not always a true indicator of creditworthiness.

[haulingthescoreup]

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@Anonymous wrote:

...I think the risk factor of "too many accounts with balances" makes absolute sense when someone owes a substantial amount. However, with these piddly amounts, it is just silliness. FICO scoring should be able to recognize the difference between high balances on too many accounts and small balances on accounts.

The upshot is that FICO scoring is really "just a number" and not always a true indicator of creditworthiness.

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Well, in a way, it does. That's where util comes in.

I hear what you're saying, though. It's up to you whether the score drop bothers you enough to do the early-pay game. How many points did you lose?

What we have to remember is that these factors weren't created, in the sense that someone thought that they ought to be included. They are factors that emerged after statistically analyzing many, many credit records. They found that those who had most or all of their account reporting balances eventually were more likely to default on their debts than those who didn't. Whether the balances were high or low didn't affect the predictive power. Thus we are stuck with it as one of the potential negative factors.

I'm now at the point where I regard my statement dates as my due dates, so I don't have any problems in paying before the statement date. To me, it's the same as paying before the due date.

But everyone needs to come up with a system that makes us each of us comfortable, both in the account maintenance department and in the resulting scores.

[Anonymous]

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@haulingthescoreup wrote:

 Thus we are stuck with it as one of the potential negative factors.

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True! However, we are also stuck when we don't use some CC for a bit as we then have to feel threated with closure by the CCCs. I don't need the FICO point right now (I lost 11 points, see numbers in my original post) but since I just opened three new accounts, I want to keep everything as smooth as possible until these accounts are one year old (by which time I should have gotten back all my points that I lost from opening them). I don't want to give Amex and friends any reason to perform AA on my account (even though they allegedly don't use FICO scores, they might have a similar scheme in place that resembles the FICO model).

I guess in a year, having too many accounts with balances will not hurt as much anymore as my score will be up in the 770s again.

[Anonymous]

The Fico messages at least make halfway sense. Here a comparison to the messages from a different service :

What factors raise your Score:

The total balance on all your credit cards is relatively low compared to your total available credit limit. This has a positive impact on your credit score.

What factors lower your Score:

AMOUNT OWED ON REVOLVING ACCOUNTS IS TOO HIGH.

Yes, I got those both at once .

[Anonymous]

Ulan, I agree that myfico has more reasonable score explanations.What you got is just stupid. I once subscribed to another online service and cancelled before the free trial expired. The information provided was just silly and the scores were fake. I forget what the site was called (I think something like Identity Guard) but when I tried to cancel, I had to call in and was met with a VERY pushy CSR. DId I say pushy? That would be an understatement. The guy screamed at me and I felt stressed to say the all important "NO" very loudly several times for 5 minutes. Glad they never got a dime from me!

[Anonymous]

You are an immigrant, too, right? I am often surprised of how these CSRs behave, even those from Discover or Wells Fargo. They seem not be afraid of losing customers that way.

[vanillabean]

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@haulingthescoreup wrote:

I'm now at the point where I regard my statement dates as my due dates, so I don't have any problems in paying before the statement date. To me, it's the same as paying before the due date.

But everyone needs to come up with a system that makes us each of us comfortable, both in the account maintenance department and in the resulting scores.

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I used to pay the present cycle the day after the previous cycle's due date. Now I often pay it in the morning of the statement date, a few days later. Or anytime during that narrow window, it's up to when I'm in the mood for it. And if I miss it, that's no big deal, because the score has enough cushion for that sort of stuff.

But it somehow feels good not paying by the due date. I feel grumpy when I have to pay for something that happened long ago, like a vacation, just can't enjoy it quite as much when I have the bill to look forward to. If it's out of the way ahead of time, my mind can linger endlessly at the beach without waking up.

[Anonymous]

ULAN I got that message too.  The reason my score

stays at 782 is MY REVOLVING BALANCES are too high.

[smallfry]

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@Anonymous wrote:

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@haulingthescoreup wrote:

 Thus we are stuck with it as one of the potential negative factors.

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True! However, we are also stuck when we don't use some CC for a bit as we then have to feel threated with closure by the CCCs. I don't need the FICO point right now (I lost 11 points, see numbers in my original post) but since I just opened three new accounts, I want to keep everything as smooth as possible until these accounts are one year old (by which time I should have gotten back all my points that I lost from opening them). I don't want to give Amex and friends any reason to perform AA on my account (even though they allegedly don't use FICO scores, they might have a similar scheme in place that resembles the FICO model).

I guess in a year, having too many accounts with balances will not hurt as much anymore as my score will be up in the 770s again.

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I've avoided the CLD from not using cards often enough by trimming my plastic down to 5 accounts. Might eventually go down to 3 I dunno. 

[haulingthescoreup]

I've still got 10 (I think), and with rare exceptions, I don't use them much.

The only CLD I ever had was from BofA 2 years ago when they were hitting everyone, and I got it back by saying that I needed the full CL to do BT's.

Not saying that it's never going to happen, and I'm certainly not saying that it didn't happen to others, but I still have something like $130K in total CL (which is absurd), and I'm hard-pressed to put $1,500 total on my cards each month. That's for gas, grocs, cell phone, random plane tickets and birthday presents, etc. Never a CL other than the one mentioned above, when BofA went after everybody.