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May 24 2019

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Does using credit karma affect my credit score


A Rare Glimpse Ins >

This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.

L ike the formula for Coca-Cola , the FICO credit scoring formula is a closely guarded secret. The Fair Isaac Corporation, however, does give us a glimpse into the secret sauce from time to time.

For example, Fair Isaac has disclosed what factors go into its scoring model and the weight to be given each factor:

While these factors are helpful, they leave a lot of information out. For example, how does a late payment affect your score? Is it better to have a zero balance on your credit cards? And how exactly will credit inquiries lower your FICO score?

Well, I found some answers to these questions over at the myFICO forums. Apparently, Fair Isaac released the following chart about the FICO formula:

It took me some time to unravel this chart. But if you spend some time with it, you’ll see that it’s packed with some useful information, particularly if you are trying to improve your score.

For example, if you have a late payment on your record, the biggest impact to your score occurs in the first five months. In month 6 you’ll see a 5 point increase, and by month 12 another 10 points.

Another thing I found interesting about this chart is the impact carrying a credit card balance has on your score. You get the biggest boost to your score if you carry a balance ranging from $1 to $99. If you have a zero balance, your score actually takes a 10 point hit. Go figure.

Finally, this gives some insight into how credit inquiries affect your score. With four or more credit inquiries, your score can drop 50 points.

Keep in mind that the actual impact on your score depends on many factors not reflected in this chart. And if you want to check your score, there are several free ways to get your credit score.

Take the 31-Day Money Challenge

Our 31-Day Money Challenge will help you get out of debt, save more, and take back control of your life.

Bonus: You’ll also get instant access to my interview of a husband and father who retired at the ripe old age of . . . 30. Seriously!

What others are saying: “Hi Rob. I’m at Day 26 in your 31 day money challenge podcast. Thank you, thank you, thank you! I’ve been looking for a comprehensive guide to all-things-money and this has been so informative.” –Danielle

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32 Responses to “A Rare Glimpse Ins >

This whole credit score thing is idiotic: my FICO score goes up and down month to month without me doing anything negative to it AT ALL. I want to know WHY! And I don’t mean a 30.000 foot view of ‘why’ but I want to know precisely what exact change on what account affected my score HOW. You want me to play the game, FINE – tell me the damn rules! I don’t mean ‘sample models’, I don’t mean ‘partial models’ I mean: PUBLICIZE AND BREAK DOWN THE DAMN FORMULA. Enough of this keeping people in the dark!

They never will tell you the algorithm. Your real credit score, is the one the banks pay for not the free crap you get online. The credit score system is B.S.

Companies need some kind of reference on which to grant credit. I don’t think it makes a lot of sense from a lending point of view, but it does from a credit standpoint. Doesn’t make sense? If your credit score is 750 because you were late on a mortgage payment, and you win the lottery and net $100 million, your credit score is still 750. It might make you out to be less than reliable to pay your debts, but it doesn’t say much about your ability to do so.

Credit Karma scores are often 100 points higher than the score obtained by a lender. And all Credit Karma has to say is that “everyone uses different scoring methods”. Well, how about Credit Karma find a way to use whatever the lenders use.
Also, there is often no apparent correlation between a FICO score and the details of the report from which it is derived. It is unlikely that they are stupid. It must be that they have some other agenda. Other than quantifying credit risk.

Used to, you couldn’t even get your real fico number without someone in the business running your credit and telling you. I think a lot of people don’t understand how these things work and for good reason: They don’t want you too.

Like Craig who posted and claimed to work for the fico. Why didn’t he point out a couple of common errors without having to give away trade secrets?

The higher interest rates a bank can charge and the more fees, the more money they make. They don’t want you to understand it and sometimes, maybe not since the housing crash, put in clauses penalizing you if you overpaid or tried to payoff a mortgage.

I opened a charge card to raise my score but it continues to drop. I had to look to see why. Low credit line and I’d charged like 38% of the total line in one month which amounted to less than 100 bucks which I paid off before interest hit me. Because it was 38% of the total limit and not under 30%, that dinged my rating.

Called a mortgage broker about a loan. She did ask if she could run my credit which I said yes. Another ding. Because it wasn’t worth her time, she never even called me back. But, she actually did me a favor because I then ran that company through a google search and found it was one of the worst companies to deal with.

On credit cards, some are designed to keep you in that vicious cycle of almighty fees and lower fico scores. Buy a house or a car, it’s due on the same day each month. Easy to remember. Get a card with a 24, 25 or even 28 day cycle, it always changes and makes it harder to keep track of. First thing you know, you have in your mind it’s due on the 15th when it’s actually three days earlier. Bam! You get hit with a late fee. Let that happen again and maybe your credit score gets dinged again.

The system is stacked against the basic consumer; that’s how banks make their real money. When we have homes going up in price so quickly, making the down payment something more of a fantasy than reality, the fall back is renting which is one of the modern slavery bonds of this society.

When I came of age and was at working looking for another place to rent, I ran across section 8. What is that? An old lady told me. She said that’s when rents got high. Sure, anytime the government hands out money, the price is going to go up. This is true of food stamps, I think, too. Rather than giving out commodities is what it was called when I was a kid and a neighbor was just giving away the stuff she didn’t want (which is probably one reason it was discontinued) coupons are given for food. It’s a win win situation for supermarkets.

I like to pay my credit cards just before the due date. I don’t pay the whole balance. I try to leave about ten dollars on each card. That way my utilization is at about one percent. I personally think an auto loan is good. But have that big stack of cash to pay on that first payment. Pay most of the loan on that first payment, and then make very small payments until you reach the full term of the loan.

again, people misunderstand utilization.

you can UTILIZE your credit card, or even OVER UTILIZE your credit card even with paying your balance in FULL each month at the due date.

UTILIZATION is how much of the card’s balance you use on a given month, NOT how much balance you carry past the due date (i.e. not paying off in full).

I see a lot of people get confused with this so I just wanted to chime in.

Just sign up for Credit Karma for free and see the utilization rate. It’s a snapshot of when they reported the balance – NOT if you’re paying interest in any balance past the due date.

cash is king, debt is dumb.

Your score is a snapshot at the time it is computed, so don’t worry about utilization unless you need the extra 5-10 points. In that case, pay your balance off only after credit card posts to agencies, but before your grace period ends. That means you get the best possible score and don’t get charged with interest.

Never get a car loan, always cash always.

It takes 6 months of history for the FICO algorithm to work.
Is that from account opening or just 6 months of meaning that january 15th to July 1st would be enough?

The score is intended to guage whether people can manage debt. If somebody has a credit card but doesn’t use it, they aren’t really managing debt, only managing the potential to have debt which is worth something, but realistically not as much as buying stuff with the card and paying it off in full each month. All you have to do is wait for the bill to be issued before you pay it each month so it will show some activity and you still don’t have to pay any interest. It doesn’t make any sense to pay before you get billed and it is economically a poor choice to carry any balance on a credit card since the interest rates are very high compared to other types of debt.

I read a bunch of these posts and I just wanted to put in my 2 cents. A lot of people are complaining about how these scores are secret (annoyingly with good reason) and how it doesn’t make sense. IMO, Tyler (two posts back) was on the right track, you have to put it on the creditors shoes.

What does credit card companies do? It lends money. You have a higher score, you can borrow more money. Pretty simple. Now, I’m not a creditor but I would want people who use the credit cards a lot, has money owed (for interest) and has “action”. i.e. Money owed goes up and down meaning its being used. This means, interest gained and more money for the company.

Missing payments, while that does give late fees, is chump change compared to the possibility that “you” (taking in aggregate the population) might Default. So missing a payment will lower your score.

A recent thing I learned is that if you use your card a lot and constantly zero it out before the payment due, that is bad too. But not in a negative way. It’s bad because now the credit companies have no data I think. The see 0$ in Sept and then 0$ in Oct, no change.

Banks have told me that its good to keep some credit on your cards and make sure to pay the miminum, it shows that it’s “live”. The question they couldn’t answer is, how much is a “credit score point” worth? Meaning, if I have to pay $20 in interest per month because I leave a balance, is that $20 worth my credit going up 5 points? 10? 1? That part of the math is the secret part.

Anyway, it’s a weird system, I just wanted to state why I think the balancing your credit to zero does not give you a good score. The credit card companies then have limited data on you.

Just another ‘system’ to confuse and lend a bit of fear to the average american – who’s been programmed to get married, buy a house, have children, & SPEND !

i just want to make a comment.

paying off the balance IN FULL every month (aka not carrying a balance… aka not paying interest) still SHOWS a balance in your credit reports…

i know because i’m buying a home and pulled my credit.

i always pay off my CC in full every month. but they (the CC companies) report the balance you have WHILE you’re purchasing stuff with it… then you zero it out… but you’re constantly using it so even though it zeros out, you have a balance on it…

i think people misunderstand “carry a balance” with “carrying balance from month to month”

again, you can PAY IT OFF IN FULL EACH MONTH and still CARRY A BALANCE on your credit card each month. carrying a balance means you’re using it.

If I were a lender I would want people who carry balances from month to month. I definitely do not want people who pay off their balance every month. Those people are using “my” money for free and that is not what I am in business for. I want people who pay consistently keep balances, suffer with the interest, maximize their income to pay off their revolving balances. These people I can make money from and that is why I would value the higher score that actually reflects poor financial habits. It is sick, but that is the society we live in today. I work, pay all of the bills, have four properties in my name. My wife has no income but a fifth property has the mortgage in her name. She gets a 799 score while mine averages at 739. I pay all of our credit cards off completely each month, except for the one that Chase gave me 0% with zero fees for 18 months. That one I will ride out to the max as I love Chase so much. Go figure, the FICO system is in place to figure out who is the best financial risk (or gain) for the lender; it is not there for the borrower’s benefit.

My wife and I are old and settled. In 1989, using a HELOC, we repaid all our installement debt and have not had any since. Not once.

Then, fifteen years later, we paid off the house. Our three most recent FICO scores are 846, 848, 846. It’s been years since the one time I know we were below 800. Our situation does not support the idea that a zero balance is somehow penalized.

Please correct and resubmit.

Exactly what Tyler said. The way I understand it is that credit scores are designed to show who is managing debt properly. They are *not* about being the ultimate in financial responsibility, i.e. having *no* debt. Fico doesn’t reward those who have no debt, as this chart shows. It rewards people who have multiple lines of debt (credit/loans), but pay the bills on time. I learned this valuable lesson when I simultaneously paid off three large student loans (total $8k), and my credit score immediately nose dived by 30+ points. I had read about that happening but thought it was a myth until it happened to me. Although I’m sure their calculations are far more complicated (arbitrary), than this chart, the chart is consistent with the research I have done. I currently have zero debt and no credit cards. If I were to get a credit card and immediately put $95 on it my score would go up 30-50 points. That would make me financially ‘responsible’ in Fico’s eyes. Talk about screwed up. No wonder our society has so much debt!!

The issue with FICO scores isn’t that they are created to see if someone will be late or default, that wouldn’t be a huge secret. Problem is it is also designed to help creditors decide who will actually make them money. Hence the having a low debt balance having a positive effect and having multiple lines of credit having a positive score. It is about potential gain as well, not just liabilities.

It’s a bit absurd that the mathematical models that dictate life, what people and afford and what they can’t has been obfuscated. Their models dictate what is available credit, and what isn’t. Are these models malleable? Are they mathematical constants? It’s galling that what a real family can or can’t afford is demarcated by these schmucks. What is their secret sauce? Why can an average consumer not know what decisioning is going into their life choices?
Now, these models are not something easy to communicate or replicate. I doubt that most people at Fair Issac understand them (or want to). But I think that in this election year climate such opaqueness just doesn’t fly. We have insurance companies (like Progressive) that (theoretically) reverse-engineer the actuarial tables involved in setting insurance rates.
I can only hope that the mathemagicians at Fair Issac see the writing on the wall, too.

This is absolutely true. There must be a mathematical formula or else its just someone choosing who gets to be successful.

If it’s true that carrying a balance ranging from $1 to $99 is better than a zero balance, then the FICO score is more ridiculous than I even thought. How in the world does not paying off credit card debt, or having it in the first place, prove that you are creditworthy?!

Utilising a bit of credit (ideally less than 25% of your total available credit) is a sign that you are handling your finances responsibly. Someone who uses their credit card and but can repay it and doesn’t depend on it is seen as more likely to handle future debt than someone who’s never had access to a credit line.

Never in 40 years of working earning a salary living on a budget did I default on an obligation until Wall Street decided to get into the mortgage/banking business. Where was I in and around that time? I was trying to keep my bills paid working like a banshee. With equity finally in my home purchased back in 1989, I had to refinance to pay debt from a divorce. In 2004, I unfortunately found myself in a neg-am. with 3 year pre-pay and by 2007 9% interest. I had no choice but to refinance again but the market was lowering home values $10,000 a month ended up with another bad loan, 7/1 ARM interest only. Since 2009 after realizing there were 2 forgeries on the loan docs, I sent with a police report and forensic analysis requesting a new loan to the lender, district attorney, and attorney general. Lender said, “Inconclusive”. District attorney nver replied and attorney general said hire yourself an attorney, our now Governor Davis. Ha, no attorney would take my cause. Thought I had no other recourse but to short sale so defaulted.
Big Mistake!! Now the New Hamp might have helped me. I have two more years of the 7 years left and I’m current. It was tough and depleted my emergency fund down to one month but I paid back the defaults.

I honestly don’t believe that there is a formula. In my vision the raw data goes in, gets crunched and data mined perhaps by a learning algorithm, and a score comes out the other side.

It’s main use is to allow the banks to charge higher interest to people with good credit

The scoring system is so arcane and so convoluted that a common man does not understand how it works. I am hoping that with time the industry will move to a better method.

The problem is that the industry hasn’t found a better method. And I’m not sure anybody is looking for one, either.

Although I can’t formulate a meaningful opinion on the FICO equation until I see it (not holding my breath on this one), the biggest flaw remains with the data going into it, a.k.a. GIGO. The burden of proof isn’t anywhere close to the standard for criminal proceedings. In my case, I can’t get the free reports via internet unless I co-conspire with Discover’s inaccuracy, technically perjuring myself. I sent a letter to notify the one agency of their error, & instead of fixing it, they spread it. I did get a CYA letter stating that it wasn’t “bad” information, but of course it made no mention of accuracy. …and that’s just me.

I work at Fair Isaac. Sorry to pop your bubble, but that Powerpoint slide is NOT representative of the FICO scoring formula. It’s part of a training curriculum we use with people outside our company. The slide illustrates a couple of principles we use in some formulas, but it doesn’t represent actual numbers or characteristics of those formulas. You can find good advice for managing your credit score on the company’s myFICO website.

Craig, thanks for your input, and you didn’t pop my bubble. But you may want to take the chart off the myFICO website, as that’s where I found it.

this guys info is old and out dated, now a days nobody give free credit score info. You have to sign a monthly payment agreement.

So Craig why not give us some real insight instead of being an uppity “we own the world” type ? Sure would be useful buddy.

The equation is based on multiple regression.

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SOURCE: http://www.doughroller.net/credit/a-rare-glimpse-inside-the-fico-credit-score-formula/
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May 24 2019

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Does using credit karma affect my credit score ^ Video

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Does using credit karma affect my credit score


A Rare Glimpse Ins >

This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.

L ike the formula for Coca-Cola , the FICO credit scoring formula is a closely guarded secret. The Fair Isaac Corporation, however, does give us a glimpse into the secret sauce from time to time.

For example, Fair Isaac has disclosed what factors go into its scoring model and the weight to be given each factor:

While these factors are helpful, they leave a lot of information out. For example, how does a late payment affect your score? Is it better to have a zero balance on your credit cards? And how exactly will credit inquiries lower your FICO score?

Well, I found some answers to these questions over at the myFICO forums. Apparently, Fair Isaac released the following chart about the FICO formula:

It took me some time to unravel this chart. But if you spend some time with it, you’ll see that it’s packed with some useful information, particularly if you are trying to improve your score.

For example, if you have a late payment on your record, the biggest impact to your score occurs in the first five months. In month 6 you’ll see a 5 point increase, and by month 12 another 10 points.

Another thing I found interesting about this chart is the impact carrying a credit card balance has on your score. You get the biggest boost to your score if you carry a balance ranging from $1 to $99. If you have a zero balance, your score actually takes a 10 point hit. Go figure.

Finally, this gives some insight into how credit inquiries affect your score. With four or more credit inquiries, your score can drop 50 points.

Keep in mind that the actual impact on your score depends on many factors not reflected in this chart. And if you want to check your score, there are several free ways to get your credit score.

Take the 31-Day Money Challenge

Our 31-Day Money Challenge will help you get out of debt, save more, and take back control of your life.

Bonus: You’ll also get instant access to my interview of a husband and father who retired at the ripe old age of . . . 30. Seriously!

What others are saying: “Hi Rob. I’m at Day 26 in your 31 day money challenge podcast. Thank you, thank you, thank you! I’ve been looking for a comprehensive guide to all-things-money and this has been so informative.” –Danielle

Start the 31-day money challenge!

32 Responses to “A Rare Glimpse Ins >

This whole credit score thing is idiotic: my FICO score goes up and down month to month without me doing anything negative to it AT ALL. I want to know WHY! And I don’t mean a 30.000 foot view of ‘why’ but I want to know precisely what exact change on what account affected my score HOW. You want me to play the game, FINE – tell me the damn rules! I don’t mean ‘sample models’, I don’t mean ‘partial models’ I mean: PUBLICIZE AND BREAK DOWN THE DAMN FORMULA. Enough of this keeping people in the dark!

They never will tell you the algorithm. Your real credit score, is the one the banks pay for not the free crap you get online. The credit score system is B.S.

Companies need some kind of reference on which to grant credit. I don’t think it makes a lot of sense from a lending point of view, but it does from a credit standpoint. Doesn’t make sense? If your credit score is 750 because you were late on a mortgage payment, and you win the lottery and net $100 million, your credit score is still 750. It might make you out to be less than reliable to pay your debts, but it doesn’t say much about your ability to do so.

Credit Karma scores are often 100 points higher than the score obtained by a lender. And all Credit Karma has to say is that “everyone uses different scoring methods”. Well, how about Credit Karma find a way to use whatever the lenders use.
Also, there is often no apparent correlation between a FICO score and the details of the report from which it is derived. It is unlikely that they are stupid. It must be that they have some other agenda. Other than quantifying credit risk.

Used to, you couldn’t even get your real fico number without someone in the business running your credit and telling you. I think a lot of people don’t understand how these things work and for good reason: They don’t want you too.

Like Craig who posted and claimed to work for the fico. Why didn’t he point out a couple of common errors without having to give away trade secrets?

The higher interest rates a bank can charge and the more fees, the more money they make. They don’t want you to understand it and sometimes, maybe not since the housing crash, put in clauses penalizing you if you overpaid or tried to payoff a mortgage.

I opened a charge card to raise my score but it continues to drop. I had to look to see why. Low credit line and I’d charged like 38% of the total line in one month which amounted to less than 100 bucks which I paid off before interest hit me. Because it was 38% of the total limit and not under 30%, that dinged my rating.

Called a mortgage broker about a loan. She did ask if she could run my credit which I said yes. Another ding. Because it wasn’t worth her time, she never even called me back. But, she actually did me a favor because I then ran that company through a google search and found it was one of the worst companies to deal with.

On credit cards, some are designed to keep you in that vicious cycle of almighty fees and lower fico scores. Buy a house or a car, it’s due on the same day each month. Easy to remember. Get a card with a 24, 25 or even 28 day cycle, it always changes and makes it harder to keep track of. First thing you know, you have in your mind it’s due on the 15th when it’s actually three days earlier. Bam! You get hit with a late fee. Let that happen again and maybe your credit score gets dinged again.

The system is stacked against the basic consumer; that’s how banks make their real money. When we have homes going up in price so quickly, making the down payment something more of a fantasy than reality, the fall back is renting which is one of the modern slavery bonds of this society.

When I came of age and was at working looking for another place to rent, I ran across section 8. What is that? An old lady told me. She said that’s when rents got high. Sure, anytime the government hands out money, the price is going to go up. This is true of food stamps, I think, too. Rather than giving out commodities is what it was called when I was a kid and a neighbor was just giving away the stuff she didn’t want (which is probably one reason it was discontinued) coupons are given for food. It’s a win win situation for supermarkets.

I like to pay my credit cards just before the due date. I don’t pay the whole balance. I try to leave about ten dollars on each card. That way my utilization is at about one percent. I personally think an auto loan is good. But have that big stack of cash to pay on that first payment. Pay most of the loan on that first payment, and then make very small payments until you reach the full term of the loan.

again, people misunderstand utilization.

you can UTILIZE your credit card, or even OVER UTILIZE your credit card even with paying your balance in FULL each month at the due date.

UTILIZATION is how much of the card’s balance you use on a given month, NOT how much balance you carry past the due date (i.e. not paying off in full).

I see a lot of people get confused with this so I just wanted to chime in.

Just sign up for Credit Karma for free and see the utilization rate. It’s a snapshot of when they reported the balance – NOT if you’re paying interest in any balance past the due date.

cash is king, debt is dumb.

Your score is a snapshot at the time it is computed, so don’t worry about utilization unless you need the extra 5-10 points. In that case, pay your balance off only after credit card posts to agencies, but before your grace period ends. That means you get the best possible score and don’t get charged with interest.

Never get a car loan, always cash always.

It takes 6 months of history for the FICO algorithm to work.
Is that from account opening or just 6 months of meaning that january 15th to July 1st would be enough?

The score is intended to guage whether people can manage debt. If somebody has a credit card but doesn’t use it, they aren’t really managing debt, only managing the potential to have debt which is worth something, but realistically not as much as buying stuff with the card and paying it off in full each month. All you have to do is wait for the bill to be issued before you pay it each month so it will show some activity and you still don’t have to pay any interest. It doesn’t make any sense to pay before you get billed and it is economically a poor choice to carry any balance on a credit card since the interest rates are very high compared to other types of debt.

I read a bunch of these posts and I just wanted to put in my 2 cents. A lot of people are complaining about how these scores are secret (annoyingly with good reason) and how it doesn’t make sense. IMO, Tyler (two posts back) was on the right track, you have to put it on the creditors shoes.

What does credit card companies do? It lends money. You have a higher score, you can borrow more money. Pretty simple. Now, I’m not a creditor but I would want people who use the credit cards a lot, has money owed (for interest) and has “action”. i.e. Money owed goes up and down meaning its being used. This means, interest gained and more money for the company.

Missing payments, while that does give late fees, is chump change compared to the possibility that “you” (taking in aggregate the population) might Default. So missing a payment will lower your score.

A recent thing I learned is that if you use your card a lot and constantly zero it out before the payment due, that is bad too. But not in a negative way. It’s bad because now the credit companies have no data I think. The see 0$ in Sept and then 0$ in Oct, no change.

Banks have told me that its good to keep some credit on your cards and make sure to pay the miminum, it shows that it’s “live”. The question they couldn’t answer is, how much is a “credit score point” worth? Meaning, if I have to pay $20 in interest per month because I leave a balance, is that $20 worth my credit going up 5 points? 10? 1? That part of the math is the secret part.

Anyway, it’s a weird system, I just wanted to state why I think the balancing your credit to zero does not give you a good score. The credit card companies then have limited data on you.

Just another ‘system’ to confuse and lend a bit of fear to the average american – who’s been programmed to get married, buy a house, have children, & SPEND !

i just want to make a comment.

paying off the balance IN FULL every month (aka not carrying a balance… aka not paying interest) still SHOWS a balance in your credit reports…

i know because i’m buying a home and pulled my credit.

i always pay off my CC in full every month. but they (the CC companies) report the balance you have WHILE you’re purchasing stuff with it… then you zero it out… but you’re constantly using it so even though it zeros out, you have a balance on it…

i think people misunderstand “carry a balance” with “carrying balance from month to month”

again, you can PAY IT OFF IN FULL EACH MONTH and still CARRY A BALANCE on your credit card each month. carrying a balance means you’re using it.

If I were a lender I would want people who carry balances from month to month. I definitely do not want people who pay off their balance every month. Those people are using “my” money for free and that is not what I am in business for. I want people who pay consistently keep balances, suffer with the interest, maximize their income to pay off their revolving balances. These people I can make money from and that is why I would value the higher score that actually reflects poor financial habits. It is sick, but that is the society we live in today. I work, pay all of the bills, have four properties in my name. My wife has no income but a fifth property has the mortgage in her name. She gets a 799 score while mine averages at 739. I pay all of our credit cards off completely each month, except for the one that Chase gave me 0% with zero fees for 18 months. That one I will ride out to the max as I love Chase so much. Go figure, the FICO system is in place to figure out who is the best financial risk (or gain) for the lender; it is not there for the borrower’s benefit.

My wife and I are old and settled. In 1989, using a HELOC, we repaid all our installement debt and have not had any since. Not once.

Then, fifteen years later, we paid off the house. Our three most recent FICO scores are 846, 848, 846. It’s been years since the one time I know we were below 800. Our situation does not support the idea that a zero balance is somehow penalized.

Please correct and resubmit.

Exactly what Tyler said. The way I understand it is that credit scores are designed to show who is managing debt properly. They are *not* about being the ultimate in financial responsibility, i.e. having *no* debt. Fico doesn’t reward those who have no debt, as this chart shows. It rewards people who have multiple lines of debt (credit/loans), but pay the bills on time. I learned this valuable lesson when I simultaneously paid off three large student loans (total $8k), and my credit score immediately nose dived by 30+ points. I had read about that happening but thought it was a myth until it happened to me. Although I’m sure their calculations are far more complicated (arbitrary), than this chart, the chart is consistent with the research I have done. I currently have zero debt and no credit cards. If I were to get a credit card and immediately put $95 on it my score would go up 30-50 points. That would make me financially ‘responsible’ in Fico’s eyes. Talk about screwed up. No wonder our society has so much debt!!

The issue with FICO scores isn’t that they are created to see if someone will be late or default, that wouldn’t be a huge secret. Problem is it is also designed to help creditors decide who will actually make them money. Hence the having a low debt balance having a positive effect and having multiple lines of credit having a positive score. It is about potential gain as well, not just liabilities.

It’s a bit absurd that the mathematical models that dictate life, what people and afford and what they can’t has been obfuscated. Their models dictate what is available credit, and what isn’t. Are these models malleable? Are they mathematical constants? It’s galling that what a real family can or can’t afford is demarcated by these schmucks. What is their secret sauce? Why can an average consumer not know what decisioning is going into their life choices?
Now, these models are not something easy to communicate or replicate. I doubt that most people at Fair Issac understand them (or want to). But I think that in this election year climate such opaqueness just doesn’t fly. We have insurance companies (like Progressive) that (theoretically) reverse-engineer the actuarial tables involved in setting insurance rates.
I can only hope that the mathemagicians at Fair Issac see the writing on the wall, too.

This is absolutely true. There must be a mathematical formula or else its just someone choosing who gets to be successful.

If it’s true that carrying a balance ranging from $1 to $99 is better than a zero balance, then the FICO score is more ridiculous than I even thought. How in the world does not paying off credit card debt, or having it in the first place, prove that you are creditworthy?!

Utilising a bit of credit (ideally less than 25% of your total available credit) is a sign that you are handling your finances responsibly. Someone who uses their credit card and but can repay it and doesn’t depend on it is seen as more likely to handle future debt than someone who’s never had access to a credit line.

Never in 40 years of working earning a salary living on a budget did I default on an obligation until Wall Street decided to get into the mortgage/banking business. Where was I in and around that time? I was trying to keep my bills paid working like a banshee. With equity finally in my home purchased back in 1989, I had to refinance to pay debt from a divorce. In 2004, I unfortunately found myself in a neg-am. with 3 year pre-pay and by 2007 9% interest. I had no choice but to refinance again but the market was lowering home values $10,000 a month ended up with another bad loan, 7/1 ARM interest only. Since 2009 after realizing there were 2 forgeries on the loan docs, I sent with a police report and forensic analysis requesting a new loan to the lender, district attorney, and attorney general. Lender said, “Inconclusive”. District attorney nver replied and attorney general said hire yourself an attorney, our now Governor Davis. Ha, no attorney would take my cause. Thought I had no other recourse but to short sale so defaulted.
Big Mistake!! Now the New Hamp might have helped me. I have two more years of the 7 years left and I’m current. It was tough and depleted my emergency fund down to one month but I paid back the defaults.

I honestly don’t believe that there is a formula. In my vision the raw data goes in, gets crunched and data mined perhaps by a learning algorithm, and a score comes out the other side.

It’s main use is to allow the banks to charge higher interest to people with good credit

The scoring system is so arcane and so convoluted that a common man does not understand how it works. I am hoping that with time the industry will move to a better method.

The problem is that the industry hasn’t found a better method. And I’m not sure anybody is looking for one, either.

Although I can’t formulate a meaningful opinion on the FICO equation until I see it (not holding my breath on this one), the biggest flaw remains with the data going into it, a.k.a. GIGO. The burden of proof isn’t anywhere close to the standard for criminal proceedings. In my case, I can’t get the free reports via internet unless I co-conspire with Discover’s inaccuracy, technically perjuring myself. I sent a letter to notify the one agency of their error, & instead of fixing it, they spread it. I did get a CYA letter stating that it wasn’t “bad” information, but of course it made no mention of accuracy. …and that’s just me.

I work at Fair Isaac. Sorry to pop your bubble, but that Powerpoint slide is NOT representative of the FICO scoring formula. It’s part of a training curriculum we use with people outside our company. The slide illustrates a couple of principles we use in some formulas, but it doesn’t represent actual numbers or characteristics of those formulas. You can find good advice for managing your credit score on the company’s myFICO website.

Craig, thanks for your input, and you didn’t pop my bubble. But you may want to take the chart off the myFICO website, as that’s where I found it.

this guys info is old and out dated, now a days nobody give free credit score info. You have to sign a monthly payment agreement.

So Craig why not give us some real insight instead of being an uppity “we own the world” type ? Sure would be useful buddy.

The equation is based on multiple regression.

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May 24 2019

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Apply for credit cars


Compare credit cards

Find a credit card without harming your credit score

Find a new credit card

Compare more than 100 credit cards

See cards you’re likely to get

Won’t damage your credit score

Compare credit cards

Compare top deals on 0% balance transfers, 0% purchases, cashback and rewards.
Plus get exclusive deals you can’t get anywhere else.

MoneySuperMarket is a credit broker – this means that we’ll show you products offered by lenders. You must be 18 or over and a UK resident.

You could get better offers by improving your credit score

With a higher credit score, it’s more likely you’ll be able to access more credit card offers, often at better rates.

Check your score for free in as little as 3 minutes.

You could get better offers by improving your credit score

With a higher credit score, it’s more likely you’ll be able to access more credit card offers, often at better rates.

Check your score for free in as little as 3 minutes.

0% balance transfer credit cards

A 0% balance transfer credit card allows you to move an existing debt from one credit card provider to another. You can use this to manage existing debt, or consolidate several credit card repayments into one manageable monthly repayment.

It’s a handy way to avoid paying interest on a debt if you’re currently paying interest, or your interest-free period is coming to an end.

There are some deals that will give you an interest-free period of more than three years. But be aware that you may have to pay a fee to transfer the balance, and you must always make at least the minimum repayment.

0% purchase credit cards

A 0% purchase credit card is ideal if you are planning a significant purchase, like a dream holiday or a car, and want to spread the cost over a period of time without wasting money on interest payments.

Shopping with a credit card will also give you extra protection if the product is faulty or doesn’t arrive on time, thanks to boosted consumer rights.

Some 0% purchase credit cards offer an interest-free period of more than two years. But be aware that you must always make at least the minimum repayment and if you don’t clear the balance before the interest-free period ends, you will be charged interest.

Why should I use the Eligibility Checker?

Using our Eligibility Checker makes you less likely to be one of the millions of people who get declined for credit cards every year. Eligibility Checker shows you which cards you’re most likely to be accepted for, so you can avoid the ones that are more likely to decline you. Getting declined can damage your credit score, and this makes it harder to borrow money in the future.

How does it work?

Why do I have to give you my personal information?

How long does it take?

What are ‘hard’ and ‘soft’ credit searches

It’s important to know how your credit file and credit score affect your financial situation.

Credit rating agencies build up files on all of us based on a mix of publicly-available information (such as whether you’re on the Electoral Roll) and data from financial companies about products you have or have had, such as loans and credit cards.

From this they calculate a credit score, which companies check when they’re working out whether to give you a product, and on what terms. Managing your finances well and always paying off what you owe in time will give you a good score. Missing payments, as you’d expect, will lower your score.

Every time someone looks at your file, it is recorded as a ‘hard’ or ‘soft’ search.

Finance companies make hard searches when you apply to them for a credit product, and each hard search remains on your credit report for two years. This matters because, for many lenders, a clutch of hard searches in a short period suggests you might be struggling to get a product, or that you’ve opened several accounts that could prove difficult to manage.

Soft searches occur when you or someone else looks at your file, but not in connection with an actual application. For example, when you put your details into our Eligibility Checker, we look at your file and work out how likely you are to be accepted for a range of deals, based on what we know about various firms’ acceptance criteria.

A ‘pre-approval’ search leaves no trace, so it won’t affect your score. You can use the Eligibility Checker as often as you like over any period without risking damage to your file.

Why can’t I just look at a list of cards?

We think you should have as much information as possible to help you choose a credit card. As well as all the card features, it’s important to know your chances of being accepted for a card, so you can make sure you choose the right card for you, and protect your credit score as much as possible. If you’d prefer to look at some credit cards without this extra information, you can see all cards here.

Barclaycard – Platinum Purchase Offer

Get a long interest-free period for up to 28 months on balance transfers and purchases with Barclaycard.

You won’t get this card on any other comparison site.

Representative Example: If you spend £1,200 at a purchase rate of 19.9% p.a (variable) your representative APR is 19.9% APR (variable)

Barclaycard Platinum Purchase Offer

  • 0% interest on balance transfers for up to 28months for balances transferred within the first 60 days. After this period the rate will be 19.9% p.a (variable)
  • A 3.5% balance transfer fee will be applied to your account at first. 0.8% will be refunded by Barclaycard if you transfer a balance within the first 60 days. Conditions apply – see T&Cs
  • 0% interest on purchases for up to 28 months on purchases made within the first 60 days. After this period the rate will be 19.9% p.a (variable)
  • You must be 18or over and a UK resident
  • You won’t get this card on any other comparison site.

Representative Example: If you spend £1,200 at a purchase rate of 19.9% p.a (variable) your representative APR is 19.9% APR (variable)

Check your eligibility Check your eligibility

MBNA – Long 0% Balance Transfer Card

Get a long interest-free period for up to 29 months when you transfer a balance with MBNA.

Representative Example: If you spend £1,200 at a purchase rate of 19.93% p.a (variable) your representative APR is 19.9% APR (variable)

MBNA Long 0% Balance Transfer Card

  • 0% interest on balance transfers for up to 29 months for balances transferred within the first 60 days. After this period the rate will be 21.93% p.a (variable). A 2.75% balance transfer fee applies
  • 0% interest on money transfers for up to 12 months on money transfers made within the first 60 days. After this period the rate will be 23.93% p.a (variable). A 4% money transfer fee applies
  • You must be 18 or over and a UK resident

Representative Example: If you spend £1,200 at a purchase rate of 19.93% p.a (variable) your representative APR is 19.9% APR (variable)

Check your eligibility Check your eligibility

What is a credit card?

A credit card lets you borrow money from a bank or a building society, and you can then use this money to pay for purchases and spending up front.

If you clear the money you’ve put on your credit card (your credit card balance) in full when you receive your monthly statement, you won’t pay any interest on your spending.

If you can’t afford to pay off the outstanding debt, you can make monthly repayments, but you will often be charged interest. The rates vary, but 19% is typical.

What can you use a credit card for?

There are different types of credit cards, and each will be designed for different spending needs.

to transfer an existing balance

Balance transfer credit card

Transfer money you owe for lower interest rates on your repayments

low and interest-free spending

0% purchase credit card

Spread the cost of a large purchase over a longer period of time

to transfer an existing balance and spend interest free

0% balance transfer credit card

Transfer money you owe for lower interest rates and spend interest free

to improve my credit rating

Bad credit credit cards

Meet your monthly credit card repayments and build your credit score

to earn rewards on my spending

Rewards & airmiles credit cards

Earn rewards like cashback and vouchers when you spend

a credit card to use on holiday

Travel credit card

Avoid overseas charges when you use your card abroad

What types of credit cards are there?

When comparing credit cards you can choose from the types of card below:

  • 0% purchase cards enable you to buy items upfront, and you can then pay off the amount you’ve spent over a number of months without incurring any interest charges
  • Balance transfer cards allow you to transfer an existing credit card balance to a new card that charges less interest
  • Reward cards offer cashback or loyalty points.

If you want to use a card for shopping and you can’t afford to pay off your balance in full each month, your best bet is to look for one that won’t charge interest for a number of months.

Some cards, for example, charge 0% on purchases for up to two years or more, and they can be a cost-effective way to pay for a big-ticket item, such as a washing machine or sofa. If you clear the debt before the 0% deal expires, you will pay no interest whatsoever.

Those who have run up debts on another card or cards at a high rate of interest can save money with a balance transfer deal. Let’s say you have accumulated debts of £3,000 on a card that charges interest at 19%. If you switch the outstanding balance to a card that charges 0% interest for 24 months, you can instantly cut the cost of your debt.

Be aware you’ll usually have to pay a balance transfer fee and you should try to pay off your balance before the interest-free deal ends. If you can’t, you’ll need to move it to another 0% balance transfer card. Alternatively, you could use a low rate balance transfer card that offers a low rate of interest for the life of the debt.

Reward cards are ideal if you spend on your card but pay off your balance every month as the interest rate is irrelevant. You can therefore look out for a card that offers cashback or loyalty points.

There are also various deals available for people who use their credit card abroad and for those who have a poor credit history.

Pros and cons of credit cards

Credit cards can be a great way to pay for goods and services without having to stump up the money upfront. You can even use your credit card like an interest-free loan, allowing you to borrow money for free. What’s more, if you buy something with a credit card, the Consumer Credit Act means you can get your money back if the product doesn’t turn up or is faulty.

But let’s not forget that it’s easy to run up expensive debts with a credit card, especially if you pay off only the minimum balance each month. You can also get into financial difficulty if you don’t stick to the rules. For example, most companies charge a penalty if you miss a payment, make a late payment or breach your credit limit. Bear in mind, too, that most issuers reserve their best deals for people with a spotless credit record, so your application could be turned down.

Find the right credit card

The best credit card for you depends on whether you will pay off your balance each month and how you intend to use the card. Our Eligibility Checker will ask you a selection of questions to help determine which type of credit card best suits your needs, without leaving a mark on your credit file.

There are hundreds of different credit card deals, but you can compare all the leading offers quickly and easily with MoneySuperMarket’s online service. So, whether you want to switch a balance or you are looking for a 0% deal on purchases, we have all the information you need at the click of a mouse.

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.

Pay off as much as you can – in full if possible

When using a credit card, it’s best to pay off your entire credit card balance every month if you can afford to – this way you won’t pay interest and you can avoid building up debt. If you can’t afford to pay off the full balance, pay off at least the minimum monthly payment – ideally more.

Don’t miss payments

Also avoid missing payments – credit card providers will often charge a penalty when you do, but more importantly, you risk harming your credit score.

Set up a direct debit

Setting up a direct debit could be a good way to ensure you pay off at least the minimum amount of your credit balance each month.

Don’t apply too often

Each time you make an application for a credit card, it leaves a record on your credit report. Too many applications will make it look like you are in desperate need for credit and as a result, your application may be rejected.

Get useful rewards

Some credit cards have extra benefits that reward you when you use them a certain way. While some of them can be tempting, it’s better to get a credit card that will give you rewards for the way you spend already. For example, an airmiles credit card is only going to be useful if you’re a regular flyer, no matter how tempting lounge access might be – but if you’re a regular shopper at a particular high street store, there might be a credit card that gives you cashback for shopping there.

Be careful when going overseas

If you’re planning to use your credit card overseas, check whether or not you’ll be charged for doing so. Many credit cards charge foreign transaction fees, so it can be a good idea to look for a card that won’t charge you for using it abroad.

Don’t use your card for cash withdrawals

Some cards will charge a fee if you use it to take cash out of a machine, and on top of that you’ll be charged interest from the moment you receive your money. So avoid using your credit card for cash withdrawals unless it’s an emergency.

Protect yourself from fraud

Credit card fraud, like any fraud, can be very serious – you should always take care when using your credit card, and be careful where you keep it. Never tell anyone your PIN and regularly check your statements to make sure there are no surprises.

What is APR?

APR stands for Annual Percentage Rate and it represents how much it’ll cost to borrow money on a particular credit card. It’s calculated by taking into account:

  • Your interest rate
  • Additional fees and charges.

However, you might see the term ‘representative APR’ on adverts for credit cards – this means that the interest rate quoted only has to be offered to at least 51% of successful applicants, so it may not be the actual rate you get when you apply.

Do interest rates change?

Credit card providers can change interest rates at any time, so it’s always a good idea to stay on top of your credit balance. If you have a 0% offer on your credit card, this will only be for a set number of months so you should make sure you clear your balance before it ends, or shift your balance to another 0% card.

How do I apply for a credit card?

You can generally apply for credit cards online, by post, or over the phone – you can also stop by your bank or building society branch and apply in person.

How do I know what card to apply for?

First you need to know what you’ll use the credit card for – cards come with different features that are useful for different purposes. If you have a large purchase coming up, you might want to spread the cost with a 0% purchase card, if you fly a lot you might want an airmiles card, and if you want to transfer a balance to avoid interest payments, a 0% balance transfer card could be ideal.

By comparing on MoneySuperMarket, you’ll be able to see a list of credit cards tailored to your needs, so you can browse at will and choose which one suits you best.

Can I withdraw a credit card application?

You’ll generally get a cooling off period of two weeks from when you receive your card, and you’ll have 30 days to pay off your balance. You can cancel by contacting your provider, either by post, phone, online, or in-branch.

However, if you want to cancel your credit card after the cooling off period, your account balance generally has to be empty.

What is my credit rating?

Your credit rating is a number that represents your creditworthiness to credit lenders, based on an analysis of your credit history (your history of borrowing and paying back credit).

The higher your score, the more likely you are to be accepted for future credit applications. If your score is low, there are ways to improve it. Find out more here.

What is a soft search?

A soft credit search is a way of finding out which credit cards you’re most likely to be accepted for without your credit score being affected.

What if I have a bad credit rating or no credit rating?

If you have a bad credit rating or you don’t have a credit history because you’ve never borrowed before, you won’t qualify for the very best credit card deals. However, some credit cards are designed specifically for those who need to build up their credit score. Just be aware they often come with low credit limits and high interest rates.

However, if you use this type of card sensibly and always pay off your balance in full, you can improve your credit score – so you’ll eventually be eligible for better credit cards.

What happens if I miss a repayment?

If you miss a repayment on your credit card balance, you may have to pay a penalty fee. What’s more, if you have any type of promotional offer with your card, such as an interest-free deal, this may be cancelled.

What if I get rejected for a credit card?

If you get rejected for a credit card, this will leave a mark on your credit report and could lead to further rejections in the future. It’s therefore a good idea to use MoneySuperMarket’s Eligibility Checker to see how likely you are to be accepted before actually applying and it won’t affect your credit score.

If you’re struggling to get accepted for mainstream credit cards, it can be a good idea to apply for a credit builder card instead.

How do I get more credit?

You might be able to get more credit from your provider if you prove yourself to be a responsible borrower by repaying on time and never missing any payments. Once you’ve established a good credit history, you might be successful when asking for a higher credit limit.

Can I pay off debt early?

Fortunately, unlike many loans and mortgages, you generally won’t be charged for making early repayments – which means it’s a good way to get ahead of your balance.

Can I get joint credit cards?

You can’t get joint credit cards in the same way as bank accounts and mortgages, but you can add additional users to your own credit cards. However, you should remember that it’s still the primary cardholder’s responsibility to pay off the balance.

What is Section 75 of the Consumer Credit Act?

The Consumer Credit Act was established in 1974, and under Section 75 the credit card lender is jointly responsible with the retailer or supplier for any goods or services you purchase with your credit card. This means if those products are faulty, or if there was any contract breach or misrepresentation on the retailer’s part, you can claim from your credit card company as well as the retailer.

However, you can’t recover money from both sides, so it’s useful for when the retailer has gone bust or they won’t respond to your communication. You should be aware the purchase value must be between £100 and £30,000 in order for you to be able to claim.

How do I cancel my credit card?

You can cancel your credit card by contacting your lender, by phone, email, online, post, or in person if they have a local branch.

Why use a credit card?

Credit cards come in all shapes & sizes, finding one that suits you can make a world of difference to your pocket.

What card is best for me?

A credit card can be a useful addition to any wallet, purse or pocket. Find out what type of card will suit you best.

What is a balance transfer?

Find out more about how balance transfer credit cards work and what’s available.

Gu > How can credit card protection help you to recover money?

Understand your credit score

Do you know what your credit score is?

A gu > Everything you need to know about student credit cards.

What is a credit card?

What is the purpose of a credit card?

The advantages and disadvantages of credit cards

Credit card pros and cons

Contactless payment cards

What is a contactless payment card?

Credit Card Calculator

See how much it will cost to pay off your credit card, and how long will it take

Business credit cards

How to compare business credit cards

What is a good credit score?

Credit scores and ratings explained

Getting your first credit card

Find out how to select, and get approved for your first credit card with our helpful guide.

How to apply for a credit card

Whether it’s a reward or balance transfer card you are after, read our top tips on how to apply for a credit card.

How to rebuild your credit score

Read our guide for six top tips that should help you improve your credit score.

Best credit cards to use abroad

Work out your best options for spending abroad. Read our guide to find out more.

Explore more credit cards

Can’t find what you’re looking for? Try looking at our news, views and in-depth credit cards guides

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SOURCE: http://www.moneysupermarket.com/credit-cards/
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