Should utilization matter more than debt?

[805orbust]

Dang, I NEVER considered that.  Even if there are 300,000 of us who think like this and plan it out, thats still less than 1/10 of 1%.  Or something like that.  I am far from the math guru type. 

I don't ever see that being worth the trouble of adjusting algorithms... Of course there is Chase.  5/24 has put the kabosh on at least some of it... Of course you could just as easily alter sign-up bonuses and get the same effect.  OR perhaps they start asking for income... Yikes!

[sarge12]

When you really come down to it, everyone who spends enough time in this forum should be able to get in the 800 club...it is really not magic, just knowing what you can control and waiting for what you cant control to occour. I'll cover the catagories

1) Payment history...this is totally in our control, it just means paying our bills on time. 35% of score here.

2) Debt and utilization....this is also totally in our control, and easily manipulated with CLI's and paying early if necessary. 30% of score here

3) New debt and inqueries...this is totally in our control, new debt lowers AAoA and inqueries lower score.

4) Account age...this is not in our control, but will happen, you just have to wait for it.

Control 1,2,& 3, and when enough time passes for 4 to increase, you will reach the 800 club, guaranteed. The following will prevent this.

1) Failure to pay on time, often caused by carelessness or spending more than you earn, which no one can do for too long.

2) Too much debt, and high utilization. Failure to keep up with these is a sure credit score killer. Once again, we need to spend less than we earn, and keep utilization low.

3) Too many credit applications...the temptation is always there when a score is increasing, but new accounts lower AAoA, and add inqueries, so it will slow down reaching 800.

The information you can learn in these forums will arm you with all the knowlege needed to get in the 800 club. The necessary desire and self discipline however is entirely up to each individual, and 800 credit scores are not a necessity in life. Many people live happy lives without ever having an 800 credit score. It is highly unlikely you will get an 800 score by accident, but it is possible. Most of us with high scores, are very aware of debt load, and utilization, and actively control them. Most of those in the 800 club also know to limit new credit applications also.

[SouthJamaica]

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@sarge12 wrote:

When you really come down to it, everyone who spends enough time in this forum should be able to get in the 800 club...it is really not magic, just knowing what you can control and waiting for what you cant control to occour. I'll cover the catagories

1) Payment history...this is totally in our control, it just means paying our bills on time. 35% of score here.

2) Debt and utilization....this is also totally in our control, and easily manipulated with CLI's and paying early if necessary. 30% of score here

3) New debt and inqueries...this is totally in our control, new debt lowers AAoA and inqueries lower score.

4) Account age...this is not in our control, but will happen, you just have to wait for it.

Control 1,2,& 3, and when enough time passes for 4 to increase, you will reach the 800 club, guaranteed. The following will prevent this.

1) Failure to pay on time, often caused by carelessness or spending more than you earn, which no one can do for too long.

2) Too much debt, and high utilization. Failure to keep up with these is a sure credit score killer. Once again, we need to spend less than we earn, and keep utilization low.

3) Too many credit applications...the temptation is always there when a score is increasing, but new accounts lower AAoA, and add inqueries, so it will slow down reaching 800.

The information you can learn in these forums will arm you with all the knowlege needed to get in the 800 club. The necessary desire and self discipline however is entirely up to each individual, and 800 credit scores are not a necessity in life. Many people live happy lives without ever having an 800 credit score. It is highly unlikely you will get an 800 score by accident, but it is possible. Most of us with high scores, are very aware of debt load, and utilization, and actively control them. Most of those in the 800 club also know to limit new credit applications also.

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Let us also remember that everyone who spends time in this forum spends (hopefully) more time in the real world..  where stuff happens.

[805orbust]

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@sarge12 wrote:

When you really come down to it, everyone who spends enough time in this forum should be able to get in the 800 club...it is really not magic, just knowing what you can control and waiting for what you cant control to occour. I'll cover the catagories

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Sarge that may be the most brilliant post I've ever read here. Succinct. You distilled it down to the gold nuggets. Well said, and thanks for the clarity.

[marty56]

Utilization is a income agnostic way to measure risk.  I can say from my experince, as I maxed out one credit card, I opened another and then another and so on.  My whole focus at the time was which card had room for another charge till my debt got to around 60k.  I wish at the time FICO scoring would have stopped me from getting to 60k worth of debt.

[Anonymous]

The post above is a perfect example of what I'm talking about.  $60k in debt.  There are others that can get upwards of $80k-$100k in debt and since their utilization is still acceptable due to high credit limits they can still possess fantastic scores indicative of little to no risk.  I know if I had even $15k-$20k in debt I would see myself as a big risk as it would be difficult for me to pay that back in a reasonable time frame, but utilization wise I'd receive top scores still.  The system does doesn't make a lot of sense.

[sarge12]

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@Anonymous wrote:

The post above is a perfect example of what I'm talking about.  $60k in debt.  There are others that can get upwards of $80k-$100k in debt and since their utilization is still acceptable due to high credit limits they can still possess fantastic scores indicative of little to no risk.  I know if I had even $15k-$20k in debt I would see myself as a big risk as it would be difficult for me to pay that back in a reasonable time frame, but utilization wise I'd receive top scores still.  The system does doesn't make a lot of sense.

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If credit scoring system were set up to benefit those in debt, I agree it would make no sense, It is not, it is set up to maxamise profits for credit card issuers, while mitigating risk. To be honest, BBS, the credit card industry could care less if you or anyone else has a hard time paying the money back, only that you do pay it back. Their objective is to get as much of the money you earned as is possible. They know that it will lead a certain percentage into bankruptcy, but truth is, even when that happens, the bankrupt debtor has payed so much interest, late fees, over-limit-fees and such for so many years, that the banks losses are mitigated. The whole system is set up to take the money from suckers. Do yourselves a favor and don't be one. They offer enticements such as bonus rewards, extended warranties, purchase protections, and other perks to try and lure you in. Take their bait, and leave them an empty hook. Just PIF always, and take their money.

[Anonymous]

I agree with all of that.  I know it sounds redundant at this point and I find I repeat myself a lot... I just don't think that if credit scores are supposed to be an indicator of risk that someone with $80k in revolving debt (would could have a salary half of that) should be viewed as a very low risk [with respect to utilization].  That's the only problem I have with the whole thing.  Yes, those people may make on time payments and perhaps never even miss a payment all the while sending plenty of interest the way of the creditor... but debt = risk, and for any number of reasons those payments can immediately stop.  I agree with what you said about the amount of interest likely paid up until that point is often more than enough to offset it, though.

[Anonymous]

Honestly I think we can come up with endless scenarios where the current scoring system doesn't really work or make sense. But don't think for a minute a bunch of bank executives haven't had this same conversation before. It really doesn't matter if it doesn't work some of the time only that it works most of the time. It's just based on probabilities and average's, and really even when they lose they don't care...it's someone else's money they wagered anyway.

[Anonymous]

True, can't say I disagree with any of that.