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FICO AMA Discussion Thread

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Regular Contributor

Re: FICO AMA Discussion Thread



Tom Quinn: Within FICO Scores there are characteristics that look at balances and at utilization ratios.  Generally speaking, the data shows that utilization information is more predictive of future risk versus balance information and therefore it weighs more heavily in the score.

Thank you to everyone who made this possible!! I would take this AMA over travel points any day of the week Smiley Happy What an unbelievable perk of this community!

 

As for the balance vs utilization discussion, I'll be filing that one away for research purposes Smiley Happy .   To know that utilization is far more important than balance carried is...practically speaking....very interesting Smiley Happy. I will perhaps be revisiting how I manage my balances to maximize float without penalty Smiley Happy

Message 21 of 75
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Re: FICO AMA Discussion Thread


@SouthJamaica wrote:

6. according to FICO the above penalties are not based on any philosophy, but on experience that all-zero balances are slightly more predictive of risk than low balances


SJ, curious if your personal view on this is still the same.  I know this is a topic that you and I have always disagreed on regarding the penalties imposed from AZ or paying off a lone loan.  I feel I've always sort of been in the minority that those penalties don't bother me and with the absence of TD use I can see their merit in terms of risk assessment. 

Message 22 of 75
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Re: FICO AMA Discussion Thread


@Birdman7 wrote:

@Brian_Earl_Spilner wrote:

@Birdman7 wrote:

@Brian_Earl_Spilner wrote:

It was interesting to learn that percentage of on time payments is indeed factored in despite conventional wisdom on here.


@Brian_Earl_SpilnerI'm not sure that was resolved in that context. Anything less than 100% penalizes. (Exceptions are new files that dont' have any established payment history.) Anything can be converted to a percentage and the more lates, the more penalty and the percentage drops drops.


It pretty much was. While they weren't talking about the higher percentage of on time payments on an account, they mention number of accounts that are paid as agreed. That would mean adding more on time accounts would have a positive outcome for someone that has missed a payment. 


Respectfully I think they were referring to when you add your second and third revolving accounts, which adds points by reducing the too few bankcard penalty. Jmho. 


Yeah, I'm not seeing where you get that.

 

"FICO Scores reward consumers who have a higher percentage of accounts with no delinquencies, more accounts currently paid as agreed, and those who have a longer credit history."







Message 23 of 75
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Re: FICO AMA Discussion Thread


@Birdman7 wrote:


Totally agreed, with the caveat that I believe there are 2 scoring factors, or as they call them, characteristics; there may be 4: # of revolvers w/ a bal, # of accts, w/ a bal, % of revolvers w/ a balance , and % of accounts with a balance. Seems # is more prevalent in thin or young files whereas % trumps in thick or mature files.


I sincerely doubt there is a % of accounts with a balance based on all open accounts. That % attribute is likely limited to cards. After all, open loans always have a balance.

 

Conversely, the # of accounts with balances likely includes all open accounts - IMO. There does not appear to be a count only attribute based on just revolvers. My mortgage and charge card were included in count but, my AU card was not when I tested this in 2016. You can model risk behavior based on total # of accounts with a balance and % revolvers (including charge cards) with a balance. The other two characteristics you mentioned create interaction effects.

 

There are profiles with only cards - so % with a balance works quite well for that. There also are profiles with only loans and PLOCs. % with balances would be a terrible metric but, #with balances does correlate to risk. A person with 10 loans is more likely to realize a 90 day late than a person with one student loan.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 24 of 75
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Re: FICO AMA Discussion Thread

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.

 

 


Message 25 of 75
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Re: FICO AMA Discussion Thread

@BrutalBodyShots wrote: "...I have always disagreed on regarding the penalties imposed from AZ or paying off a lone loan.  I feel I've always sort of been in the minority that those penalties don't bother me and with the absence of TD use I can see their merit in terms of risk assessment."


I can also see their merit. And keep in mind as they said, if there’s no debt ($0 balances), they can’t evaluate your management of it:

“Elizabeth Warren, Senior Product Manager at myFICO: The FICO® Score measures how well you manage your debt. If you don’t have any debt, the algorithm doesn’t have any data about how well you manage your debt. Think of it like being a fast runner. You may be a very fast runner but if you’ve never run any races it would be hard for anyone else to know that you are a fast runner.”

That will change with trended data.

For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.


RIP:

Oldest/average age varies by bureau. Estimates above.


Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 26 of 75
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Re: FICO AMA Discussion Thread


@Birdman7 wrote:
I can also see their merit. And keep in mind as they said, if there’s no debt ($0 balances), they can’t evaluate your management of it:

“Elizabeth Warren, Senior Product Manager at myFICO: The FICO® Score measures how well you manage your debt. If you don’t have any debt, the algorithm doesn’t have any data about how well you manage your debt. Think of it like being a fast runner. You may be a very fast runner but if you’ve never run any races it would be hard for anyone else to know that you are a fast runner.”

That will change with trended data.

Very interesting.  While I think trended data will benefit those who happen to cary All zero once in a while, it will potentially harm those who for innocent reasons, had high statement balances post in the last year.

Message 27 of 75
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Re: FICO AMA Discussion Thread

Also, I wish someone was brave enough to ask the experts:

 

What are your credit scores? Smiley Happy. But perhaps that is a bit too much. Just curious if the experts are even allowed to have credit cards and if they do, do they have rituals or restrictions because of their line of work.


Message 28 of 75
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Re: FICO AMA Discussion Thread


@Brian_Earl_Spilner wrote:

@Birdman7 wrote:

@Brian_Earl_Spilner wrote:

@Birdman7 wrote:

@Brian_Earl_Spilner wrote:

It was interesting to learn that percentage of on time payments is indeed factored in despite conventional wisdom on here.


@Brian_Earl_SpilnerI'm not sure that was resolved in that context. Anything less than 100% penalizes. (Exceptions are new files that dont' have any established payment history.) Anything can be converted to a percentage and the more lates, the more penalty and the percentage drops drops.


It pretty much was. While they weren't talking about the higher percentage of on time payments on an account, they mention number of accounts that are paid as agreed. That would mean adding more on time accounts would have a positive outcome for someone that has missed a payment. 


Respectfully I think they were referring to when you add your second and third revolving accounts, which adds points by reducing the too few bankcard penalty. Jmho. 


Yeah, I'm not seeing where you get that.

 

"FICO Scores reward consumers who have a higher percentage of accounts with no delinquencies, more accounts currently paid as agreed, and those who have a longer credit history."


OK taking it piece by piece, those who have a higher percentage of accounts with no delinquencies will of course have a higher score because they will have less delinquencies, and they will be rewarded because they won't be as penalized by the delinquencies. 


A profile with 3 accounts paid on time will have a higher score than a profile with 1 account paid on time. 

that's just my reading of it. 

For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.


RIP:

Oldest/average age varies by bureau. Estimates above.


Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 29 of 75
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Re: FICO AMA Discussion Thread


@Credit12Fico wrote:

Also, I wish someone was brave enough to ask the experts:

 

What are your credit scores? Smiley Happy. But perhaps that is a bit too much. Just curious if the experts are even allowed to have credit cards and if they do, do they have rituals or restrictions because of their line of work.



I don't think they would answer that type of personal information. We were lucky to get the information we did. 

For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.


RIP:

Oldest/average age varies by bureau. Estimates above.


Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 30 of 75
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