Does the FICO score have a memory?

[Anonymous]

I was wondering if the score formula takes a real history into account. Or is it only calculated based on todays snapshot?
Let's assume I have 1% util. for 1 year. That means every month the same utilization is reported to the bureaus.
The 2nd scenario could be this one: 11 month 50 % util, payed down to 1% in month 12.
Now, if the score is calculated only based on month 12, the score should be equal.
Is this really the case? Does anybody know if this is true?
The CR shows ballances of the last x month, so it is possible that this is used.

[Anonymous]

Your credit report does store some history but pretty much what you see with a few exceptions. The score is only a snapshot based on current reports.

[Anonymous]

If it's only the snapshot, why do people keep this low utilization and pay before the payment cuts? Paying after the payment cuts (and before the payment is due) gives a ~20 day interest free credit (while, on the other side, I get interest at my bank). Of couse that is bad for the CCC, and thus, receives the score penalty that we know.

Message Edited by Physicist on 09-08-2008 10:31 PM

[haulingthescoreup]

I don't think that the motivation is to make people pay early, because believe me, no one is aware of this. I'll bet they would have found a way to get the word out if they wanted.

I worked out the interest once, and it was a couple of cents per account. I do it because it's as easy for me to pay early as to pay after the statement posts, and it gives me that much more insulation before risking a late. Also, even though util is easier to turn around than other factors, there is still at least a 30-day lag if you suddenly need the score increase, and that's not counting oddly-reporting cards and the horrendous pokiness of the CRA's.

[Anonymous]

Most people don't pay early nor do most people need to unless they are utilizing a large percentage of their available credit lines. Those people stand to benefit by paying early and thus boosting their scores. The one time it truly pays to worry about paying before the statement cuts is when you are applying for a loan. Tweaking with util percentage and the number of accounts reporting balances could gain you 20-30 crucial points and put you in a different interest rate tier. At all other times, if your scores are not borderline and would not cause credit card companies any worry, you have no real need to worry as long as your utility is under 20 percent and you don't have any maxed out cards.

---

Physicist wrote:
If it's only the snapshot, why do people keep this low utilization and pay before the payment cuts? Paying after the payment cuts (and before the payment is due) gives a ~20 day interest free credit (while, on the other side, I get interest at my bank). Of couse that is bad for the CCC, and thus, receives the score penalty that we know.

Message Edited by Physicist on 09-08-2008 10:31 PM

---

[mrlimo]

I payed in full before the cut date for a few months playing around with what senerio worked best for my situation. If I need to bump up the score for an app I know hands on what I need to do and how it is effected.

[Anonymous]

So do you think FICO scores you better if you have under 10% util.  for say, 6 consecutive months as opposed to 4 months low util, then 1 month 29%, then back down to below 10% for the 6th month?  Would the score be the same after than sixth month either way?

[haulingthescoreup]

---

@Anonymous wrote:

So do you think FICO scores you better if you have under 10% util.  for say, 6 consecutive months as opposed to 4 months low util, then 1 month 29%, then back down to below 10% for the 6th month?  Would the score be the same after than sixth month either way?

---

In the second scenario, your scores would drop in that one higher-util month, but in the sixth month, if your util is where it would have been without the bump, the scores should be identical.

When you use the sims to project your scores over differing time periods, the language makes it look like there's some sort of benefit for dragging out payments, but there isn't. That scenario is just combining the effects of util and X number additional months of clean history. When it comes to util, it's just what is showing on your reports that very moment.

[Anonymous]

I believe with revolving UTL FICO only looks to see last payment and current balance. I believe what you did 2 payments back is not read as long as there are no negative actions.

I PIF on due date because when I PIF early I can't keep track of what's going with statements. They say I owe money then I pay more and end up with a credit, then some how it turns in to a balance and I get lost. Paying after it goes to statement works best for me. I will go through the trouble of PIF before statement only when I need my scores up.

[Anonymous]

---

@haulingthescoreup wrote:
I don't think that the motivation is to make people pay early, because believe me, no one is aware of this. I'll bet they would have found a way to get the word out if they wanted.

I worked out the interest once, and it was a couple of cents per account.

---

Yes, a couple of cents for you, but a big chunk for the CCC, because they have more than only your account.