[Update 4/9] Experiment in paying all revolvers to zero

[HeavenOhio]

I don't think I'd take the opportunity to try this only because the opportunity is there for the taking. But all cards reporting zero is something I'd consider allowing if I decided to shift my positive balance from one card to another. I'd be more likely to let two cards report balancess, though.

[Anonymous]

It doesn't surprise me that a simulator would suggest that paying all cards to zero (and allowing those AZ to report) would increase score.  That's probably one of the reasons we see a post in this forum literally every day from someone saying "I paid off all my credit cards and lost 20 points... what the heck?!" 

But, those that have been around a bit on here already know what will happen under FICO scoring with all zero reported balances.  We know simulators are BS.

[Anonymous]

In my experience the simulator is not bad when taken as a general guide.  You can't take it literally because it is made to be a bit fuzzy and imprecise so it can't be used to reverse engineer the proprietary algorithm by running it millions of times, on different credit profiles and with different inputs.

So I am not at all surprised that it is designed to obscure the difference between, say, 2% utilization and 0%, but I have found that all other factors being equal the simulator is pretty predictive of the actual score change between 80% and 2%.  Or 20% and 2%.

That said, there should be stronger disclaimers on the part of myFICO in providing the simulator... SouthJamaica knew what he was doing and did it anyway in the name of science, but presumably many others do not.

[Anonymous]

But if it's a supposed to be a decent FICO simulator it should know that reporting all zero balances results in a score drop.  When you use those simulators it should have different options instead of just "pay off all your credit cards" - it should have one that's along the lines of "pay down credit cards to 1%-9% of total limits" and include other ranges.  The pay down to 1%-9% should simulate the most points, where going from that ideal zone to "paying off all credit cards" should show a typical 15-20 point drop.  These simulators are probably one of the reasons we get "why did my score drop 20 points from paying off all my credit cards" threads every day.

[Anonymous]

I strongly agree that the simulator could be improved to be more informative to myFICO customers.

In the meantime, myFICO could sticky this account of SouthJamaica's little experiment to the simulator page....

[Thomas_Thumb]

The simulator has its place. I think it can give you a general feel for things that may and may not impact a given profiles score - although magnitude of predicted change is questionable. Here' what I see using the various what if options:

Simulation Description	Point change
Get a credit card any CL	0
Get a store card	0
Apply for new credit	0
Personal loan up to $50,000 limit	0
Car loan up to $100,000 limit	0
New mortgage up to $3,000,000 limit	0
Refinance mortgage	-20 to -30
Max out credit cards	-90 to -100
Forget to pay a bill	-75 to -90
Don't pay any bills	-90 to -125
Account goes into collection	-105 to -115
Miss a payment by 90 days	-145 to -160
Bankruptcy	-240 to -300

[Anonymous]

A simulator has it's place alright.  Right in the trash.

I bet a simulator would suggest a score increase as well for paying off your only installment loan... probably the #2 misconception on this forum outside of paying off all credit cards.

"Forget to pay a bill": -75 to -90 = manipulative and inaccurate. 

I have a bill due on the 1st.  I forget to pay it, but pay it on the 10th.  According to this statement above, I should lose 75-90 points.  We all know that unless I'm 30 days past due, me "forgetting" to pay a bill for a period of days or even weeks is not going to impact my score at all.  Just another minor example here of simulator BS.

[Thomas_Thumb]

Clearly "forget to pay a bill" means a 30 day late - minor delinquency. I have no doubt that a fresh 30 day late would drop my score at least 60 points.

A 10 day late would not show up on a report and would not be a simulation input variable.

The two primary things I see not factored into simulators are:

1) Score drop when paying off your only open installment loan

2) Score drop with zero revolving cards reporting balances/zero % utilization

The simulators don't consider B/L ratio on open loans best I can tell - at least they don't if you have an open, well aged mortgage on file.

[Anonymous]

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@Anonymous wrote:

A simulator has it's place alright.  Right in the trash.

I bet a simulator would suggest a score increase as well for paying off your only installment loan... probably the #2 misconception on this forum outside of paying off all credit cards.

"Forget to pay a bill": -75 to -90 = manipulative and inaccurate. 

I have a bill due on the 1st.  I forget to pay it, but pay it on the 10th.  According to this statement above, I should lose 75-90 points.  We all know that unless I'm 30 days past due, me "forgetting" to pay a bill for a period of days or even weeks is not going to impact my score at all.  Just another minor example here of simulator BS.

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I wonder - would it be worthwhile to put together a 'common misconceptions' post including all these 'gotchas' hidden within the FICO algorithim and ask to have it stickied somewhere?

[Anonymous]

> I bet a simulator would suggest a score increase as well for paying off your only installment loan... probably the #2 misconception on this forum outside of paying off all credit cards.

I just made that mistake, a couple of months ago.

Thank to the myFICO simulator.

I lost about 20 points on my FICO 8 scores...