We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.

[Elizabeth_FICO]

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@K-in-Boston wrote:

Thank you Tom and Tommy for this wonderful opportunity.  Due to the way that different credit monitoring front-ends display both revolving utilization and total revolving credit limits differently in some cases, there has always been some confusion over how certain accounts are treated by FICO scoring models.

a.) Can you clarify whether closed revolving credit accounts reporting both a balance and a credit limit are indeed essentially treated the same as open revolving accounts until they reach a $0 balance for the purposes of both individual account and aggregate revolving utilization, particularly for FICO 8?

b.) Can you can confirm whether revolving HELOC accounts and revolving credit card accounts with very large reported limits ($100k+ for example) are weighted the same as smaller revolving accounts individually (i.e. does a $150k balance on a $200k HELOC carry the same weight as a $15k balance on a $20k limit credit card?) and whether they are weighted the same, or even factored in at all, for aggregate revolving utilization, particulary for FICO 8?

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Tom Quinn: If an account is marked as closed but still has a balance reported, that balance information may be considered in balance and utilization characteristics within the score.

For older score versions, HELOC accounts may be considered in the score including in several balance and utilization related characteristics. For newer score versions, HELOC accounts may not factor into balance and utilization.

[Elizabeth_FICO]

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@BmoreBull wrote:

Thank you for taking the time to try and answer our questions. My question is, does a paid charged off account affect you negatively for the entire 7 years that it's on your reports? Or does the effect lessen over time, like a 30 or 60 day late does? Thank you again. 

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Tommy Lee: A paid charge off account can impact your FICO Score while it’s on the credit report, but its impact will lessen over time.

[Elizabeth_FICO]

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@Anonymous wrote:

If I have 10 cards with a total credit line of 100K and I carry 8K of debt all on one card that has a CL of 8.5K, why does my score suffer so much, whereas if I spread that 8K of debt evenly on my 10 cards, my score does not take such a hit? I would think spreading it over 10 cards is more risky, if you add up the minimum payments of all 10 cards vs the minimum payment on 1 card. The monthly commitment would be higher spread over 10 cards.

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Tommy Lee: The FICO Score considers both overall revolving utilization and the highest utilization on a revolving account. The weight given to each of these factors is based on historical data from millions of credit files, which indicates that both of these factors are predictive of future payment behavior. 

[Elizabeth_FICO]

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@Girlzilla88 wrote:

Thank you and Hello!       

Why are the penatlys so different between Credit B's if the 'negative marks' are the same for the different ones?!    For example EQ may give -10 points for high use while high use on an EX will give -5 or +5 etc why do they affect differently for the same issues?!   ((of course random figures just example))

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Tom Quinn: While the design blueprint of the FICO Scores is consistent across the credit bureaus, each model is optimized for the credit bureau data on which it was developed, which may result in different point assessment for a similar data element reported across the three bureaus.

[Elizabeth_FICO]

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@SouthJamaica wrote:

Questions:

1.  Is there a separate revolving utilization scoring factor for "raw dollars" in total limits (as opposed to percentage of limits)? If so, what are the thresholds or breakpoints for this factor?

2.  Are there certain breakpoints or thresholds in percentage of aggregate revolving utilization? If so, what are they?

3.  Are there certain breakpoints or thresholds in percentage of aggregate installment loan utilization? If so, what are they?

4.  Why do one's FICO 8 scores drop when (a) all revolving accounts report a zero balance, and (b) one's only open installment loan is paid off?

5.  Is it accurate to say that with respect to a closed revolving account that has a balance, the balance is factored into the aggregate revolving utilization computation, but the limit is not?

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Tom Quinn, 4 & 5:  The data shows that having 0% utilization is slightly riskier than having a low utilization.  Having low utilization is an indication that you have credit and are using it responsibly.

If an account is marked as closed but still has a balance reported, the balance information may be considered in balance and utilization characteristics within the score.

[Elizabeth_FICO]

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@Meanmchine wrote:

On the same day .......

Why can your FICO8 scores go up and at the same time  your FICO9s go down ?

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Tom Quinn: While both FICO Score versions have a very similar design blue print, FICO Score 8 and FICO Score 9 are unique and independent scoring systems.  As such, one version could increase while the other version decreases when there is a change in the underlying bureau data.

[Elizabeth_FICO]

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@coreysw12 wrote:

Why do mortgages still use (very) old FICO 2, 3, and 5 models?

Which carries more weight: utilization of specific credit cards, or overall utlization across all cards?

And finally, is utilization factored into scores by the range it falls into (where any utlization in a certain range, say 20-29%, results in the same score), or is it more linear (where, for example, 26% utilization might result in a higher score than 27%)?

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Tom Quinn: The versions commonly used in mortgage lending are FICO Score 5 at Equifax, FICO Score 2 at Experian and FICO Score 4 at Transunion. In mortgage lending, Fannie Mae and Freddie Mac and the FHFA determine the credit criteria and score versions used for most mortgage loan decisions.

The models look at revolving utilization in several different ways which are all predictive of future credit risk.

Generally speaking, the characteristic values are classed into ranges or intervals for point assignment.

[Elizabeth_FICO]

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@CreditCuriosity wrote:

Why do FICO scores penalize high utilization on a given card.  Say you have a 10k limits, but pretty common sense there are tiers of utilization on a said card if you surpass a utilization whatever it might be you lose FICO points.  Lender gave you a 10k limit to use, but most people dont want to go above say 3k due to 30% utilization and some people dont want to go above 1k for 10% threshold, etc..  So people chase higher limits on card say they go for CLI's so they might have a 50k CL so they feel comfortable carrying a 10k CC debt at 0%..  It seems like a broken system to me personally as lenders have to carry more reserves to lend out for higher CL's for people with excellent credit and incomes, but joe consumer only plans on using say 10k on a 50k card or at least that amount be the highest they will report otherwise they PAY off some if not all of it before statement cuts avoiding a score hit.  I know that is an excessive example, but long story short FICO penalizes a person for using the credit they were granted from a lender, yet most lenders don't take that into consideration.   Being it seems like a maxed out say 90% 9k out of 10k card is penalized so heavily and weighted so heavily.

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Tom Quinn: FICO Scores evaluate revolving credit in a number of ways – both in terms of balances and utilization. To more accurately predict future risk, the balance and utilization characteristics consider all accounts combined as well as the highest utilization on an individual account.

[Elizabeth_FICO]

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@Hex wrote:

When will FICO 10 be released?

With a 4 year old BK 7 why would all CB's give a risk factor of a public record and only Equifax give a risk factor of recent public record. How long is something considered recent? 

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Tom Quinn: FICO Score 10 is targeted to be released at all three credit bureaus for lender use by the end of 2020.

[Elizabeth_FICO]

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@coreysw12 wrote:

Why does even just a single 30-day late payment, that happened perhaps many years ago, have such a detrimental effect on one's score even after they've displayed perfect payment history in the years since?

For example, it's fairly easy for someone with 10 years of credit history, and no lates, to have scores in the 800's. Whereas, if the same person has a single 30-day late from 5 years ago, their score might be 75 points lower.

While I understand that a very recent late payment is a red-flag that the person might be getting into credit trouble, I would think that after a few months of perfect payments after that, the late payment should have little or no affect on the score anymore - and yet it seems to affect scores by 50 to 100 (or even more) points for many years afterwards, long after the red flags were proven to be a false alarm, until it eventually falls off the report or the person begs and pleads with the creditor to have it removed. I also understand that, as time goes on, their effect on your score is gradually reduce some, but they never stop having a major effect until they are gone. Why is the FICO model so punishing for slip-ups that happened in the distant past?

Also, why is the effect of an old 30-day late so much more drastic against people with higher scores? For example, a single 30-day late from 5 years ago might have almost no affect on someone with a 650 score, but it could be taking 75 points off someone's score who would otherwise have an 850 without it.

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Tommy Lee: The weight given to missed payments is based on historical data from millions of credit files, which indicates that those with missed payments are riskier than those who don’t have missed payments. The impact of a missed payment will lessen over time.

Additionally, the impact to FICO Score of a missed payment is highly dependent on th e starting credit profile of the consumer.

A FICO Score measures credit risk based on a credit file at a single point in time. So, when considering why a score changed from a missed payment, it’s helpful to consider what the credit file looked like before and after the missed payment. If the credit file indicates significantly greater (or lesser) credit risk than before, then a FICO Score will change more than if the credit risk is similar before and after the missed payment.

Please see following blog post for more info: https://www.fico.com/blogs/how-credit-actions-impact-fico-scores