It's all in the perception

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MemberSince99
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It's all in the perception

Postby MemberSince99 » Tue Dec 03, 2013 6:58 am

I read on Credit Secure as I checked things over that "Credit cards are considered "maxed-out" when you have spent 90% or more of the credit limit."


I'm like you guys obviously haven't spent much time on MyFICO where spending over 4% is a huge red flag and maxed-out to them. Even here I've seen posts saying 30% is "huge" utilization.


Personally I'm starting to think the whole thing is kind of a farce. First why give you credit they are uncomfortable with you using? Not sure how that makes sense. Secondly, carrying a balance long term is totally different than paying them once a month when the bill comes but for scoring purposes these are treated the same way. This works in our favor as you CAN pay the balance and see a score bump as soon as this reports, however I think it hurts more people in that you seem to be carrying more than you really are but the system has no way to know that.


Maybe eventually to try to solve the issue, lenders could push updates daily, or when a lender requests your credit, it could take the time to request updates from lenders to have the most current information. I think that would be a lot more accurate than what we have now.


takeshi
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Postby takeshi » Tue Dec 03, 2013 8:03 am

MemberSince99 wrote:I'm like you guys obviously haven't spent much time on MyFICO where spending over 4% is a huge red flag and maxed-out to them. Even here I've seen posts saying 30% is "huge" utilization.


Personally I'm starting to think the whole thing is kind of a farce. First why give you credit they are uncomfortable with you using? Not sure how that makes sense

It's all about risk analysis. The utilization aversion on myFICO doesn't mean that utilization doesn't matter. I and plenty of others have experienced AA due to high utilization. I still have a USAA card that was dropped to $3,600 and has yet to recover even though the notoriously conservative PenFed granted me a $30K CL since then.

MemberSince99 wrote:Secondly, carrying a balance long term is totally different than paying them once a month when the bill comes but for scoring purposes these are treated the same way.

...and that's really the key. It's not just utilization but high utilization over time with low payments. In other words, the creditors aren't looking at individual data points but trends. Daily updates would provide more granularity but they'd still be looking for trends.

As always, one has to consider the source. myFICO users tend to farm, obsess over utilization at all times, and keep every possible account open. There are varying styles when it comes to managing one's credit.

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djrez4
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Postby djrez4 » Tue Dec 03, 2013 9:54 am

takeshi wrote:farm


You mean "garden."
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MemberSince99
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Postby MemberSince99 » Tue Dec 03, 2013 10:21 am

djrez4 wrote:You mean "garden."



Just this weekend I saw a post on FICO where someone asks "So what's this garden thing I keep reading about" and I just kind of groaned inwardly and closed the browser....



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