FICO AMA Discussion Thread

[SouthJamaica]

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@Anonymous wrote:

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@SouthJamaica wrote:

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@UncleB wrote:

We would like to thank Tom Quinn, Tommy Lee, Elizabeth Warren, Paul Panichelli, @Elizabeth_FICO, and all the other folks over at FICO who helped make the AMA a success.

For anyone who missed it, the AMA thread can be found here:  https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score-Experts-Ask-us-anything/td-p/6130984 

The AMA is now over and the AMA thread is locked, but feel free to continue the discussion in this thread.

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Here's where I embarrassingly betray my ignorance: what does "AMA" stand for?

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Ask Me Anything. It was popularized on Reddit, where celebrities and other VIPs would let any user ask them questions.

From Presidents & Presidential candidates to Bill Gates to Snoop Dogg lol

https://mashable.com/2014/02/11/amazing-reddit-amas/

(The Woody Harrelson AMA is now Reddit-infamous because so many people asked him about things other than his then current movie "Rampart". He kept posting "Can we talk about Rampart?" and "focus on the film", which just encouraged the opposite behavior.)

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Thanks @Anonymous and @coreysw12 Now I understand why @Anonymous said it was a "Q&A" rather than an "AMA" ...  because it was selective.

[Anonymous]

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@Thomas_Thumb wrote:

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@Anonymous wrote:

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@Anonymous wrote:

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Notice my language: I said "Looks as if the thresholds are 10, 30, 50, 70, 90 and 100% with typical rounding." I never said those thresholds were confirmed, but if 8.99% worked, 9.4% seems to be the highest percentage before crossing into the next interval.

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8.99 worked in the same way that less than 8.98 or less than 8.999995 (as I found via test), since the real threshold was less than 9.5% the whole time.

I'm going to put "under 10% after truncating all your balances and rounding percentage to the nearest integer" in a macro.

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If you look at summary reports and use the third party published utilization from reports, then utilization is shown in whole numbers. For example, 9% or 10% would be listed. A listing of 10% represents a different tier than 9%. My vote would be to show the ceiling for the best tier at 9% even if up to but not including 9.5% were included. The same rationale would apply to ceilings associated with higher level tiers.

Experian in the past mentioned utilization max out at 90%. Someone at 89.7% might assume they have avoided max out as they are under 90% but after rounding up they get placed in the max out tier. As a general guide the table should err on the conservative side. In a like manner, point penalties are quite severe in the 69% to 89% aggregate utilization range. That tier is, IMO, better placed in the severe category along with the 90% and above as shown in the table.

The table with general categories and tiers is a useful visual aide. Don't add too much complexity or descriptive footnotes.

Side note: Credit Karma has a similar utilization table for use with VantageScore. I found the tiers to be helpful even though the TU VS 3.0 simulator outputs a score shift for almost every single % changes in aggregate utilization. For the table's sake, follow the KISS principle.

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Thanks, @Thomas_Thumb . I'll keep all that in mind when I edit the chart. I really wanted to avoid putting too much text into it as well (complexity and footnotes, like you said).

I've always been reporting something between 0 and 9% (ind. or aggr.) for my entire 1yr 9mos of revolving history, and my VS3 scores just don't move due to utilization in that range. They only jump up significantly at 3mo and 6mo after adding new accounts.

[Meanmchine]

Thankyou team FICO for answering our questions

[Anonymous]

Apparently, thin file can be defined, but not thick file. I was really hoping for an answer to that question.

I saw a lot of scores drop "You have an insufficient number of accounts that are currently paid as agreed" when my 3rd card first showed up on a myFICO 3B report in March.

The rest of them - EX Auto 8, EX Banckard 8, and EQ/TU Bankcard 5/4 - dropped it when my 4th card appeared.

Note that I also had a closed installment loan (SSL) on file for my entire 1yr9mo revolving credit history. I don't think that counts as 'currently paid as agreed', but if it does, that means I had 5 total accounts when all scores dropped the 'too few accounts' statement.

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Tom Quinn: There is no single definition of “thick file” in the industry. Lenders, scoring companies, the credit bureaus may define this differently.

Tom Quinn: There is no single definition of “young vs mature file” in the industry. Lenders, scoring companies, the credit bureaus may define this differently.

Tom Quinn: These percentages provide consumers with an estimation of how much each category contributes to the overall score calculation. As referenced in myFICO Education, these percentages can vary for various sub-segments such as those with thin files. [Anomaly detected, Captain.]

[longtimelurker]

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@Anonymous wrote:

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@Credit12Fico wrote:

Seems the opportunity is lost on this one but:

1) Why the need for secrecy in the scoring algorithms?  Is it because the predictive nature of the Fico models is influenced by whether or not the credit user knows how to "game the system" for the best score?   Would knowledge of the algorithms mean that more credit risky consumers could create the illusion of a low risk profile?  Is that even possible? You cannot fake account age. Debt is debt, and moving it around to different cards does nothing for reducing the balance. Inquiries are inquiries and you can't credit seek without inquiries. What am I missing? 

Is it just "proprietary" because otherwise the banks would not pay for it? I can see that angle. FICO adds value in data mining that banks wouldn't be privy to given they can only mine the data of their own customers.

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Pretty much for all those reasons and more

And yes... you can hide/shift debt using business accounts, most of which rely on personal credit for approvals. PL for debt consolidation consistently boosts scores, etc.

Fake age with AUs

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I am assuming that as a business the "trade secret" aspect is much more important.   If the details were public and easily implementable, enough issuers would decide to do their own and FICO would lose a revenue stream.   The FICO adds value in data mining that banks wouldn't be privy to given they can only mine the data of their own customers. point is a double-edged sword.    While a much wider customer base gives a lot more data to work with, a say regional bank could also view it as dilution "My customers in mid-north-west Centerville aren't like those crazies on the coasts!" and more public information could allow them to try to tailor the algorithm to what they think reflects their customers.

Enabling gaming the system is also a concern, but more because it impacts the usefulness, and thus value, of their product, it's the issuers and not them that would take any losses!

[coreysw12]

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@longtimelurker wrote:

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Enabling gaming the system is also a concern, but more because it impacts the usefulness, and thus value, of their product, it's the issuers and not them that would take any losses!

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Ya but like someone else mentioned earlier, there's only so much "gaming" someone with poor finances and/or credit habits can actually do. They're never going to be able to game their way to a 700+ score, no matter how many tricks they know. Even if they could, they won't be able to keep it that high for very long. So if only those with better credit habits, more knowledge, and more ability to pay debts are able to game the system, is that actually a problem for the banks? Aren't those precisely the sort of people that banks want to extend credit to anyways?

Largely, what I've seen is that the people who are most actively trying to (and most able to) "game" the system are the ones with 785 credit scores who want to have an 850, where there's little functional difference from gaining a few points.

For others who have perhaps a bunch of 60+ lates, chargeoffs, maxed out cards they can't pay down, or a BK on their record, there's only so much "gaming" that can be done, no matter how much insider knowledge we have.

Additionally, knowing exactly what sorts of things cost us points (and, by extension, make us riskier to lend to) helps us avoid those issues, which is good for everyone - both banks and borrowers.

[Anonymous]

Time to put this new utilization rounding information to the test!

In 2 weeks I'll start getting myFICO alerts to balance changes on my Mastercard and Visa, reporting at 9.450% and 9.492%, respectively. That will confirm the rounding method, and also that 'less than 9.49' is not necessary. Util < 9.5% should always work fine.

To compute 'Max Balance' for a certain threshold, and compute 'Max Util' from it, use the following formula in Excel:

(Max_Balance_Cell): =TRUNC( ( (Target_Threshold + .005) * Credit_Limit)  - .01 )

(Max_Util): =Max_Balance_Cell / Credit_Limit

[Where Target_Threshold is a cell using percentage format (e.g., 0.09 is shown as 9.00%).

I subtract a penny because not all credit limits are a multiple of 1000. TRUNC is used because FICO scoring doesn't use cents, and Max_Balance will be as close as we can get without going over.]

[MudkipsRKooL]

Hey guys not sure if it's too late to ask or going thru if the question is already asked but here it goes. "For adding Authorized User, what is the best tactic? adding just 1 card to their profile or adding say three? Does adding more help their profile or not if it lowerst the AAoA?"

[Anonymous]

@MudkipsRKooL It depends upon the age of the account added and the existing average age of the profile. And it may or may not count on versions eight and nine.

Exception is American Express which dates it the date you add them.

[SecretAzure]

I'm sad they didn't choose to answer my question.

Why isn't there a guaranteed, positive path into the FICO scoring system for those with no credit?

• Why do we rely on third parties (Capital One, Discover, Credit Unions, etc.) to be the ultimate deciding factor on whether one will start off on the right foot or the wrong? 

It really boggles the mind that there isn't an obvious, guaranteed path into credit.