Utilization vs. AAoA

[SouthJamaica]

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@Anonymous wrote:

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@WhiteCleats wrote:

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@Anonymous wrote:

AZEO stands for "all zero except one."  It's a good strategy for squeezing out every extra point in the 40 days prior to an important credit application (or any time you are wanting to get some extra points).  The understanding is that the remaining card will report a small balance.  AZEO does not help you build a higher score long term.

The SS loan technique is described here:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

It's for people with no open installment loans.

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That SS loan technique is fascinating.  I had thought of doing something similar myself -- getting a loan to give me an open installment but I dismissed the idea thinking I'd end up paying a bunch of interest that would outweigh the value to my score.  But that method is far more sophisticated than what I thought up.  But, as I said, since a car loan is looming for me in about 20 months, I think I'll skip it.  

Nevertheless, great write-up, CreditGuy!

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Many people choose to implement the SSL technique as a precursor to getting that first important loan (car or home typically).  This way they get a 30 point boost, and that can help them secure best rates with the loan they actually care about.  You'll lose that bonus once the new loan reports, but you'll have secure the best terms possible which is what you were aiming for.

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Do we know that the 30 point boost occurs in the Auto scores, and if so which ones?

Auto 8, Auto 2?

[Anonymous]

Since it works for FICO 8 Classic, I think it very probable that it works for FICO 8 Auto.  Likewise, since it does not work for FICO 04 Classic, I'd be very surprised if it does work for FICO 04 Auto.

Bear in mind too that some major auto financing uses FICO 8 classic -- they aren't compelled to use the Auto Enhanced version.  Carmax is apparently one such place.

http://ficoforums.myfico.com/t5/Auto-Loans/Auto-Lender-That-Uses-Standard-FICO-Not-Auto-Enhanced/td-...

[Anonymous]

My answers in green below.

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@WhiteCleats wrote:

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@Anonymous wrote:

A 3%-5% balance won't adversely impact score at all.  Anything in the 1%-8.9% range is ideal and will maximize your FICO scores. 

So that I'm clear, utilization between 1%-8.9% is actually better than 0% utilization in terms of score?  

Yes.  If all your cards report at $0 you will get a (roughly) 20 point penalty, compared to all zero except one with the remaining card reporting a small balance.  Note that your resulting utilization can be tiny, e.g. 0.1%.  It will still be rounded UP by FICO to 1%.  This rule of rounding up is the reason that you want your util < 8.99%.  If it were 9.01% it would get rounded to 10%.

The prevailing belief here is that a utilization of 8.9% and a utilization 0.1% is indistinguishable.

The only time this may not be true is if you have over 50% of your cards reporting a balance.  So, using an example of someone with exactly 3 credit cards, they'd want to allow 1 of them to report a small balance in the 1%-8.9% range.  1 of 3 is 33%.  0 reporting balances would result in a big score hit.  2 of them reporting balances would be 67% of cards and possibly result in a slight ding, and 3 of them reporting balances would be 100% which could also result in a slight ding.  1 of 3 in this example would be ideal.

In my specific situation I have 4 cards.  The majority of the time only one reports a balance and I'm working on paying that down.  It's currently at 16% utilization.  The other 3 are paid in full.  Occasionally I carry a balance on a second card but it's paid in full soon after that.  So in my worst case scenario I have 50% of my cards with a balance and total utilization is under 9%.  Is any of that dinging my score?  Would the best thing be to never allow more than 1 card to report a balance?  Or, am I over thinking this and it doesn't matter until I'm apping for a car?

 In my view, you are overthinking.  You can get the extra points that come from AZEO in the 40 days before you apply for the car.  As SJ and BBS and I discussed elsewhere recently, however, if a person feels like he needs his score to be at its best every single month, then do AZEO every month.  It's your call.

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[Asilomar]

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@Anonymous wrote:

Yes.  If all your cards report at $0 you will get a (roughly) 20 point penalty, compared to all zero except one with the remaining card reporting a small balance.  Note that your resulting utilization can be tiny, e.g. 0.1%.  It will still be rounded UP by FICO to 1%.  This rule of rounding up is the reason that you want your util < 8.99%.  If it were 9.01% it would get rounded to 10%.

The prevailing belief here is that a utilization of 8.9% and a utilization 0.1% is indistinguishable.

Fascinating.  So per what you said below, I am definitely overthinking this.  

In my view, you are overthinking.  You can get the extra points that come from AZEO in the 40 days before you apply for the car.  As SJ and BBS and I discussed elsewhere recently, however, if a person feels like he needs his score to be at its best every single month, then do AZEO every month.  It's your call.

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Okay, after all this new information I now realize that I don't need to get so ODC over my utilization because it's not lowering my score by very much -- if at all.  I'm at 9% now and that will drop when my new CLI's get reported and as I pay down the 16% card.  And, even if my mom does go nuts with her Macy's card I don't need to stress over it until I'm ready to apply for credit.  At that time I can either get myself removed as an AU or pay her card down myself if it's that big of a problem.  Meanwhile, I'm going to do that secured loan technique and let that help thicken my file in advance of getting a new car.

Whew!  I feel so much better.  I was really starting to make myself crazy and I'm pretty type-A to begin with.

Thanks for all your help, CreditGuy, as well as everyone else who lent a hand on this thread.  I really appreciate it.

[Anonymous]

You are definitely on the right path.  Taking on the SSL will give you a nice confidence boosting increase which will feel good.  Letting your file age and not apping for credit is really all you can do right now and unfortunately it takes time.  So, just sit tight, continue making on-time payments and keeping that utilization low and the rest will work itself out as you approach apping for that auto loan in the future.