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Is FICO scoring flawed?

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marty56
Super Contributor

Re: Is FICO scoring flawed?


@Anonymous wrote:

I guess my point was that the FICO scoring system is flawed in that it can't differentiate between someone who uses credit wisely and pays their balance off each month and someone who has a perpetual balance and only makes minimum payments.  It's purpose is to rate you as a credit risk.  I would thing that paying off your entire balance every month makes you much less of a risk than someone you carries a perpetual balance by making only the minimum payment and then charging that amount again, thereby keeping a similar balance.


FICO scoing has no memory of prior balances and what you pay each month, nor can it tell if the balance is new or an old balance that is just being paid down.  There could be a valid reason that a person decides to only pay the minimum payment each month (BT/promotional rates) vs PIF'ing.  The point is mute anyway since with work, you can control how much, if any, is reported on the CRs.  Most times when I use my CC, I pay the charge as soon as it posts to the CC.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 11 of 13
Jazzzy
Valued Contributor

Re: Is FICO scoring flawed?


@Anonymous wrote:
The CL on Amx Blue is 35,000.  That balance steadly declines every month as I pay my car off.  I've never used that card except for that one check.  Because me and my other half use the other 2 cards to purchase everything, there's a balance of at least $2,000 on each for every months statement.  I also use the cards for my business expenses.  The miles I get pay for a free trip to Maui 3 times a year, so I wouldn't want to stop using them.  I thought they use to report the amount of your payments.  From there they could tell you were paying off your balance. 

Hi HawaiiSurf...I'm with you.

 

I utilize every mile I can squeeze from my credit card usage. We, like you, paid our cards in full every month when we got the statement. We now try to pay most of our balance before the statement posts, and that can help FICO scores. Unless you are within a few months of applying for credit, however, there's not much reason to micromanage your credit card payments that way...and, with your scores, you will already qualify for the best rates.

 

I have a selfish reason for posting....can you tell me which card you use for airline miles? Right now we use a Delta AmEx and a National City Travel Rewards card. We get a few free flights each year. I'm always working to maximize my miles. Any advice?

Message 12 of 13
haulingthescoreup
Moderator Emerita

Re: Is FICO scoring flawed?

The underlying problem is that the lenders choose to report the balance as of the statement date, in most cases. If they chose to report the balance as of the due date, or the day after the due date, we wouldn't have to go through this elaborate dance.

The scoring formulas can only work with the info that's submitted.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 13 of 13
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