Score Increase Over Time

[Anonymous]

Something that would actually help a lot, and I'd like to see consumer pressure to force lenders to consider, is to do what Chase does if you PiF after statement cut: report a $0 balance immediately regardless of day.

This would honestly fix the ridiculous AZEO issue for those of us who do PIF everything. I hate having to pay in full before statement date when it matters more to PIF before due date, and I shouldn't be hammered for any points if I use my limits but PIF every month.

[iv]

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@Anonymous wrote:
Something that would actually help a lot, and I'd like to see consumer pressure to force lenders to consider, is to do what Chase does if you PiF after statement cut: report a $0 balance immediately regardless of day.

This would honestly fix the ridiculous AZEO issue for those of us who do PIF everything. I hate having to pay in full before statement date when it matters more to PIF before due date, and I shouldn't be hammered for any points if I use my limits but PIF every month.

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Except that (as scoring currently stands), that could be bad... as soon as you pay, all accounts would report as $0, triggering the "no revolving usage" ding.

You'd actually be forced to CARRY a balance to avoid that.  Be careful what you ask for!

[Anonymous]

Not necessarily. Report $5 at statement, charge $5 more, pay $5 before due date. Not too difficult!

[jamie123]

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@Anonymous wrote:
Something that would actually help a lot, and I'd like to see consumer pressure to force lenders to consider, is to do what Chase does if you PiF after statement cut: report a $0 balance immediately regardless of day.

This would honestly fix the ridiculous AZEO issue for those of us who do PIF everything. I hate having to pay in full before statement date when it matters more to PIF before due date, and I shouldn't be hammered for any points if I use my limits but PIF every month.

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It would raise everyone's scores too much if they did this. It would be too easy for the uniformed masses to raise their scores. I'm sure most people think if you PIF after the statement cuts is the best thing to do for scores.

But I do agree with you 100%.

[Thomas_Thumb]

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@jamie123 wrote:

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@Anonymous wrote:
Something that would actually help a lot, and I'd like to see consumer pressure to force lenders to consider, is to do what Chase does if you PiF after statement cut: report a $0 balance immediately regardless of day.

This would honestly fix the ridiculous AZEO issue for those of us who do PIF everything. I hate having to pay in full before statement date when it matters more to PIF before due date, and I shouldn't be hammered for any points if I use my limits but PIF every month.

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It would raise everyone's scores too much if they did this. It would be too easy for the uniformed masses to raise their scores. I'm sure most people think if you PIF after the statement cuts is the best thing to do for scores.

But I do agree with you 100%.

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^ Completely agree. AZEO is an imposition. It is a "necessary" evil for some PIF transactors trying to maximize score. 

Incomplete data reporting and resultant flawed scoring models have done us a disservice. Implementation of a transactor/revolver segmentation would resolve the undue prejudice against old school PIFers (like me) that allow charges to report naturally and then PIF statement balances. 

Fortunately Fico 8 and Fico 9 are more forgiving -with my file- to multiple cards reporting balances than are older Fico models. These newer models also are more tolerant of a moderate balance reporting on a credit card (moderate meaning something less than 29% UT on a card) as long as aggregate utilization remains low (less than 9% and preferably below 6% in aggregate - to be safe).

Given the shortcomings of the current scoring systems; it is beneficial for old school PIFers to have sufficiently high credit lines individually and in aggregate to accommodate significant balance reporting. An aggregate CL of 50 times normal monthly spend keeps my utilization under control even though all charges report. If there is a major spike in "necessary" spend, an NPSL AMEX charge card could be used without resorting to early payments as it is not considered in revolving utilization for Fico 8.

[Anonymous]

Not only is AZEO an imposition and a necessary evil, but so is ultralow utilization.  The fact that FICO values extremely low util as well as having almost all your open accounts showing a $0 balance are both symptoms of the fact that FICO has never been able to look at the much more predictive question of whether a consumer has been paying his cards in full for the last 24 months.  This is because the trended data (needed to evaluated this) simply did not exist at the three bureaus during most of FICO's history.

Basically, suppose Bob has exactly one credit card with a $1000 credit limit.  He typically charges $500-600 a month and always pays in full.  He's been doing that for several years.  Bob's situation is pretty common actually.  He doesn't need more than one card.  He doesn't need a higher CL.  So he's never pursued those.

The current models place him at high risk, because his utilization is always 51-60%.  But actually people with his payment patterns are very low risk.

If all or nearly all CC issuers end up reporting the true payment amounts to the three bureaus, then FICO and indeed all creditors will end up with the rich TD they need to identify Bob as a guy who always pays in full, and the scoring models will be able to reduce their wildly lopsided emphasis on ultralow util and AZEO.

Until this happens, it makes sense as TT observes for people to make sure they can keep their util low., either by pursuing a total credit limit 20 or even 50 times what they actually spend (suggested by TT) or by paying most of their balance off before statement date. 

[jamie123]

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@Anonymous wrote:

Not only is AZEO an imposition and a necessary evil, but so is ultralow utilization.  The fact that FICO values extremely low util as well as having almost all your open accounts showing a $0 balance are both symptoms of the fact that FICO has never been able to look at the much more predictive question of whether a consumer has been paying his cards in full for the last 24 months.  This is because the trended data (needed to evaluated this) simply did not exist at the three bureaus during most of FICO's history.

Basically, suppose Bob has exactly one credit card with a $1000 credit limit.  He typically charges $500-600 a month and always pays in full.  He's been doing that for several years.  Bob's situation is pretty common actually.  He doesn't need more than one card.  He doesn't need a higher CL.  So he's never pursued those.

The current models place him at high risk, because his utilization is always 51-60%.  But actually people with his payment patterns are very low risk.

If all or nearly all CC issuers end up reporting the true payment amounts to the three bureaus, then FICO and indeed all creditors will end up with the rich TD they need to identify Bob as a guy who always pays in full, and the scoring models will be able to reduce their wildly lopsided emphasis on ultralow util and AZEO.

Until this happens, it makes sense as TT observes for people to make sure they can keep their util low., either by pursuing a total credit limit 20 or even 50 times what they actually spend (suggested by TT) or by paying most of their balance off before statement date. 

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Yeah, but what happens in my current situation?

We bought a house last February. I had money set aside in my stock trading account to buy quite a bit of new furniture for the house but just couldn't pass up some 0% CC offers. I apped for 2 cards and my wife for 2 cards and they gave us substantial starting CLs. My stocks have gone up more than 20% since February but my/our credit scores have tanked because of high UTI.

So if the CRAs started to use trending data would that make all 0% credit card offers obsolete? The whole idea behind a 0% offer is to use the lender's money for free. Currently if I need my scores back I can sell my stock and pay off my credit cards inside of 2 weeks and bingo, scores pop back up. If they started using trending data you would tank your scores for years after using a 0% offer.

[Anonymous]

Yep.  People who do not PIF -- including those who are attracted to 0% CC offers -- are at far higher risk of serious delinquency than those who do (considered as a group).  Particular individuals in that group (e.g. you) may be low risk -- you can see your inner heart and bank accounts and job and know that you have almost no chance of becoming late on payments.  But the scoring algorithm can't know any of that (since your personality, values, bank accounts, stocks, and job info aren't on the credit report).

If the CC issuers began submitting monthly interest rate data, then that would enable a sophisticated TD-based scoring algorithm to distinguish between a card that had a 0% rate and which was carrying a balance vs. one which one on which the consumer was paying interest.

My tentative guess is that the following population may indeed be fairly low risk:

(a) No derogs

(b) Multiple credit cards, some of which are not 0% cards, and has at least 24 months of history on these cards.

(c) Currently carrying (or has carried in the past) a balance on a 0% card

(d) Has never carried a balance on a card that charges interest

So if the algorithm could parse out that population, then you would probably be in good shape.

Still, as far as the last several years go, people who are attracted to 0% offers are largely people who do not not have money saved -- they are typically people who are living hand to mouth.  That's because interest rates in general have been so very low for the last several years.  In the late 70s a 0% credit card would have been a really smart financial investment, since interest rates were so very high.  But now the people they attract (along with consumer finance accounts) are most likely to be people who want something that will enable them to buy something they don't have money for.   And such people may have been good scouts thus far but they are riskier bets for the future -- they just need to lose their job and then delinquencies began to mount up fast.

Naturally you are an exception -- just talking about the group as a whole.

[Thomas_Thumb]

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@jamie123 wrote:

Yeah, but what happens in my current situation?

We bought a house last February. I had money set aside in my stock trading account to buy quite a bit of new furniture for the house but just couldn't pass up some 0% CC offers. I apped for 2 cards and my wife for 2 cards and they gave us substantial starting CLs. My stocks have gone up more than 20% since February but my/our credit scores have tanked because of high UTI.

So if the CRAs started to use trending data would that make all 0% credit card offers obsolete? The whole idea behind a 0% offer is to use the lender's money for free. Currently if I need my scores back I can sell my stock and pay off my credit cards inside of 2 weeks and bingo, scores pop back up. If they started using trending data you would tank your scores for years after using a 0% offer.

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In the case of 0% interest cards that have high balances (UT%) with prolonged paydown, credit score may impacted more strongly if trended data is used.The greater impact would fade once a trend of paydown is established. I suspect once paydown drops below a key milestone (say to below 29%) the positive trend might actually lift score. 

I don't acticipate 0% promotions going away if/when trended data becomes commonplace.

[jamie123]

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@Anonymous wrote:

Yep.  People who do not PIF -- including those who are attracted to 0% CC offers -- are at far higher risk of serious delinquency than those who do (considered as a group).  Particular individuals in that group (e.g. you) may be low risk -- you can see your inner heart and bank accounts and job and know that you have almost no chance of becoming late on payments.  But the scoring algorithm can't know any of that (since your personality, values, bank accounts, stocks, and job info aren't on the credit report).

If the CC issuers began submitting monthly interest rate data, then that would enable a sophisticated TD-based scoring algorithm to distinguish between a card that had a 0% rate and which was carrying a balance vs. one which one on which the consumer was paying interest.

My tentative guess is that the following population may indeed be fairly low risk:

(a) No derogs

(b) Multiple credit cards, some of which are not 0% cards, and has at least 24 months of history on these cards.

(c) Currently carrying (or has carried in the past) a balance on a 0% card

(d) Has never carried a balance on a card that charges interest

So if the algorithm could parse out that population, then you would probably be in good shape.

Still, as far as the last several years go, people who are attracted to 0% offers are largely people who do not not have money saved -- they are typically people who are living hand to mouth.  That's because interest rates in general have been so very low for the last several years.  In the late 70s a 0% credit card would have been a really smart financial investment, since interest rates were so very high.  But now the people they attract (along with consumer finance accounts) are most likely to be people who want something that will enable them to buy something they don't have money for.   And such people may have been good scouts thus far but they are riskier bets for the future -- they just need to lose their job and then delinquencies began to mount up fast.

Naturally you are an exception -- just talking about the group as a whole.

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Yeah, when I apped for the CCs I made a pact with myself. If anything happened to my job or something that would negatively impact my finances I would sell some of my stock immediately and pay off the CCs.

It was just too good of an opportunity with the 0% offers to pass up but I also thought that they would give us small starting CLs seeing that it was basically free money. However...

My apps:

AMEX BCE Approved $21,500 CL 0% for 14 months

Citi Diamond Preferred $5,000 CL 0% for 21 months

Called up Citi and asked that the CL be raised to $15K. No dice. Did raise it to $8000 though!

My wife's apps:

Discover Miles Approved $10,000 CL 0% for 14 months

Called Discover and asked if we could transfer CL from the IT card. "Sure, no problem." Moved $10,000 from the Disco IT card's $20K CL to the Miles card. Miles card now at $20K!

BoA Cash Rewards Approved $5,000 CL 0% for 14 months

Called BoA and asked that the CL be raised to $15K. No dice. Did raise it to $8000 though!

So between my wife and I we picked up $47,500 in new credit plus transferred $10K to the 0% Discover Miles for a grand total of $57,500 in available 0% money for more than a year! Yeah, not a bad day!

I have not gotten close to any of the CLs with running balances and don't plan on it but I have been carrying a balance of about $35K across the 4 new cards. My stocks are up at least 20% since I received these cards in February so I look at it like this: I made 20% of the $35K so far this year or $7000 with their money! (Yeah, I've been very fortunate and lucky with my investments the past few years!)

I was planning and waiting to try this for a couple of years. Neither my wife or I had applied for a CC in just over 2 years before this and we did this as soon as we came home from closing on the house so our credit reports looked really pretty. We had been inundated with 0% offers and we just bided our time until we thought the time was right.