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BobWang

The Master Graphs Thread

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credithunting suggested a thread of graphs.

Feel free to contribute informative graphics.

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Just when I thought this thread would fill up with random funny images you have to go and post some useful graphs!

 

:P

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13948834156_dbff2a6ca9_o.jpg

Edited to remove top horizontal line

 

Edited by BobWang

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BW... I looked to see if I could find it.. What would be the effect of say a 750, with 10 new accounts added as they age....

 

The backdrop would be... I cleaned my reports, was 750, added 10 CC's now have 100K in revolving, Ult at %1... Was curious what to expect as these age a bit...

 

I see the effect on the Midrange.

 

My EX took a 1 point drop, and My TU came up to 762.. but that might be a little B* help...

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Interesting patterns in the last graph:

 

85 point hit for best profiles

35 for middle 4 profiles

40 points for worst profile

 

Slight uptick at 3 years of age for best & worst,

no difference between 3 and 4 years for middle profiles.

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13953657842_ce6bc4d4ea_o.jpg

 

Note the 40 point difference at Year 10 between 1 CC and loans only

 

75 point difference at Year 10

 

between >3 CCs and only loans.

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14004612653_a096ce4b9e_o.jpg

 

Total balance is not a factor when significant baddies are present.

 

With clean reports, total balances are a factor <50% overall utilization.

 

Above 50% overall utilization, all balances are treated the same.

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The purpose of this chart is to demonstrate the effect that Total Balances have on FICO scores, depending on the utilization percentage of credit cards in the portfolio. Mortgages are excluded, since they are not considered by the FICO Estimator. Arbitrary profiles have been chosen to illustrate changes at strategic points along the FICO spectrum.

Data points are generated by going to the FICO Estimator, there are many locations for the algorithm, I tend to use this one: http://www.whatsmyscore.org/estimator/index.php. After entering the appropriate parameters, the FICO Estimator will generate a score range of 50 points. These are entered into separate columns in the spreadsheet, and a simple average is computed to obtain the Mid-Range Score.

The Mid-Range Score is then plotted on the vertical, or y-axis, against credit card utilization on the horizontal, or x-axis. Total Balance amounts considered by the FICO Estimator are $250, $500, $1,000, $5,000, $10,000 and $20,000. The credit profiles were chosen to give an over-view of Balance effects over a broad range of FICO scores.

20 years is the maximum length of credit history considered by the FICO Estimator, so that was chosen as the “best” profile, the Gold Standard, if you will. At the other extreme, 6 months is the youngest profile contemplated by the FICO Estimator, since files younger than 6 months will not generate a score. 8 years was chosen as the mid-point, since that’s how the FICO Estimator data seems to fall.

After choosing the appropriate length of histories, it became a balancing act to choose bad profiles that would demonstrate Balance Effects on poorer starting FICO scores. An 8 year old credit file, with a Public Record within the last year was chosen as the first “bad” profile. The “worst” profile plotted is an 8 year old file, with a 120 day late payment within the last 3 months.

To say the process is tedious is a vast understatement, but it’s for the children.

The graph is generated with Microsoft Excel 2010, but saved in *.xls format for compatibility with versions 2007 and earlier. This description is generated with Microsoft Word 2010, also saved in *.doc format for compatibility. The Word document was then copied into Notepad, before copying and pasting into this post.

Let’s start with the very best profile, and follow what happens at different balances. “Best” means a credit history of 20 years or longer, 4 or less credit cards with balances. Not a zero balance, since that can incur a 20 point penalty over a tiny balance. But, that’s a tale for another narrative.

The very best profile will start out with a Mid-Range FICO of 805. Notice that the plot does not begin at 0%, since that point would actually be lower. I decided NOT to include that wrinkle, since that would complicate what appears to already be an incomprehensible graph.

The first data series is plotted in blue, with a diamond shape as point markers. That series is very close to the 2nd one, which just doubles the balance from $250 to $500. The second series is plotted in red, with a square marker. Series 1 and 2 only diverge at 20% utilization, at which point, a $250 balance plots at 785, whilst $500 sits at 780.

A balance of $2 to $250, and I choose $2 for a very good reason, starts at 805. $1 doesn’t work because Citi reports $1 as $0 for me, so I always use $2 as the lowest balance that reports as non-zero. But I digress.

When that $2-$250 balance represents a non-zero utilization percentage, FICO is maximized at a Mid-Range of 805. When $2-$250 becomes 10% utilization, FICO Mid-Range drops to 795. IOW, a 10 point penalty for a small balance that represents meaningful use of full credit limits.

At 20% utilization with a $2-$250 balance, we see the divergence of the second series from the first. The difference is only 5 points, but the FICO Estimator must consider that 20% utilization boundary as something significant. The two series converge again at 30% utilization, then track along exactly in sync till the end of the graph.

The second series is flat between 20% and 30% utilization, a pattern also seen in the burnt orange, purple and orange series. Interestingly, the middle “bad” profile is flat between 20% and 40%, whilst the worst profile is flat between 20% and 50%.

Of course, those bad profiles are also flat between 0% and 10%, whilst all the other series show significant declines from non-zero to 10% utilization. That means for the worst profiles, reducing utilization much below 10% will not garner the same FICO boost that better profiles would enjoy.

Going back to the first series, there is a further drop from 780 to 770 going from 30% to 40% utilization. To summarize, non-zero to 10% results in a drop from 805 to 795, or 10 points. From 10% to 20% there is another 10 point drop, from 795 to 785. There is only a 5 point drop between 20% and 30%, 785 to 780. This may be where the Urban Legend of keeping utilization below 30% lives.

Hitting 50% utilization results in the biggest hit to FICO for the best profiles. Previous 10% increments only result in 10 point FICO declines. Moving from 40% to 50% utilization results in a 40 point drop. Understandable why keeping utilization below 50% is bantered about.

Above 50% utilization, Total Balances are no longer distinguished, i.e. the hurt is the same for all balances. However, the decline is not as steep as going from 40% to 50%. There’s only a 10 point FICO drop going from 50% to 70% utilization.

70% to 90% results in a 15 point drop. 90% to 100% or more is only another 5 point hit. Take home message is that most of the damage due to utilization happens at 50%. Total FICO decline going from non-zero to 100% is 805 down to 700, or 105 points.

1,000 words

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So every post you make is worth AT LEAST a thousand words, since sometimes you post 2 pics...right?! :D (I think I've seen two graphs in one post...)

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I still like the picture better... it's much faster to assimilate all that from a graph.

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