@Anonymous wrote:
CiS,
I can see some of what you're saying if you're talking about someone coming down to AZEO from a position of greater revolving debt, but everything you said isn't relevant if you're talking someone with all zero reported balances (AZ) that allows a tiny balance to report to achieve AZEO and take the score bump. While the amount here is trivial of course, the capacity to pay actually diminishes here and in this example it doesn't cost anyone anything.
I don't doubt there are exceptions, FICO is a statistical estimate that correlates with default risk but it's not deterministic. Even overall utilization has exceptions--one person might have 90% utilization on their cards, but that could just be 10% of their income, while somebody else is showing only 10% utilization on their cards, but it actually represents 90% of their income. So those people would be exceptions, but in aggregate overall utilization is probably pretty well correlated with default risk.
So same thing here. The average person who pays their statement in full still likely carries a monthly "float" of a few thousand dollars that runs interest free, because they pay the statement balance off when it's due. But still, they are carrying that--and moving to AZEO is going to represent a reduction in their overall liabilities, and a strengthening of their financial position. For example, by running AZEO if they encountered some financial hardship they could actually skip a month's payment and then pay the next balance in full--so they sort of have that bit of a buffer if a financial emergency hits.
Someone who was already doing that, who was not running up any debt at all on their card, was already in a stronger financial position than had they been running a "float" on their cards every month. In that case, if that person goes from zero cards reporting, to one card reporting, they are providing some additional data that they are able to properly manage that one card reporting.
I didn't mean to claim this as some sort of rule that everyone who does AZEO is somehow a better risk than everyone who doesn't. Just that like every other feature of a FICO score in aggregate there likely really is a correlation between that credit picture and a lower default, because of what the average person needs to do in order to achieve it.
.....
As for the cost, a few people pointed out that doing this for a few months only incurs a small amount of forgone interst--and that's true. My scores MIGHT be high enough that I don't need to bother, but I figure for the $40 or $50 in lost interest it's worthwhile making sure I don't get dinged. My mortgage score reported as above 740 so in theory I could do nothing, but my scores aren't a LOT higher than 740, so it seems like I should play it safe and do what I can to make sure it really is above 740 on the day when it counts. If that costs me $40? OK, well spent.
