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AZERO but ONE - Credit Card Utilization Ratio Strategy


credithoarder
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Hi All,

 

I have searched this board to identify a singular thread that nails down the personal experience of members who follow the AZERO but ONE credit card utilization balance strategy  Unfortunately, I have not found any expansive explanation behind who came up with this strategy, how to best implement it, and its success rate among credit card holders.

 

To my understanding, the gist of the AZERO but ONE strategy is to zero out the balance on all credit cards in one's profile, but carry a balance on one. I do hope I have this right, because I am trying to take put it into practice (along with great payment history and credit limits) to reach the 800+ club. 

 

What I am not sure about are the following:

 

  1. Does the balance of the one card have a carry a statement balance (will incur an interest for non-zero APR card)?
  2. Does the balance of the one card have to carry a current card balance (money spent to-date) at the end of the closing date?
  3. Does the balance of the one card have to be < 30 %?

 

I utilize the spreadsheet from the following site to play around with the card balances - Card Utilization Calculator. Ideally, I like to keep my card utilization between 7%-10% max.  However, when I average out all my cards in the calculator, the total utilization rate naturally comes to less than %1.  At that point, I am not sure if having < 1% is considered to be so negligible to the Fico scoring system that it makes it appear that I really don't utilize my cards at all. 

 

As an experiment, I plan on carrying a 30% current balance on one of my cards for one billing cycle, out of 7 cards, which will bring my total utilization ratio to about 7%. 

 

That said, does anyone have any experience or insight to this approach they are willing to share?

Edited by credithoarder
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Most cards report the statement balance, but whatever is reporting as the current balance is what is scored for utilization.

 

$1 is enough, but some companies waive small balances of as much as $2, so we usually recommend $3 as the target so you don't have to remember which cards will zero out a $1 or $2 balance (leaving $0 reporting for that cycle).

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You want 800+ because, it'll win a bet?  Bragging rights?

 

From my perspective, I don't see jumping through a single hoop for a 800 score because anything above 740-760 pretty much gets you whatever credit you qualify for on the basis of income, with the lowest rates.

 

And, btw if you're not currently 740+, I don't think AZEO is gonna boost you to 800, unless you current carry something like 12-20 revolving balances at present, with moderate to high utilization.  (Even then, it's doubtful.)

 

Mind you, there's generally no harm in targeting a high credit score.  But, should the effort take on the taste of attempting to achieve a "high score" in a video game, I might suggest a review of your priorities.  (Offered up with only the greatest and kindest regard ...)

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6 hours ago, hdporter said:

You want 800+ because, it'll win a bet?  Bragging rights?

I simply want to qualify for better rates. My rates are horrible because of a short credit history.  I have never relied on credit in my life because I paid everything with cash, including my house and car.

 

However, after opening a business, I learned a hard lesson of not being able to do much without a credit profile. My 20 year old cousin who works as a barista and lives at home with her parents, has a score over 800 simply because her parents placed her as an authorized user when she was a teenager. She qualified for a $75k car loan with less than 3% APR.  Unfortunately, my six-figure income does not qualify me for the same interest rate simply because of my insufficient credit history. I managed to raise my initial credit history of 630 to just a tad above 750 after 1 year, by opening several lines of credit and paying them in full. I didn't start getting approvals and CLIs until I was above 700. So it appears that a higher credit scores does open up more doors when you have a short credit history.

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Pop a cork, because (if your FICO 8's are 720+ across the board) you've arrived.

 

I'm not the only one here to attest that it's easy to become credit fixated after having suffered poor credit.  You're in good company ;).  However, once you pop above 720, so long as you keep your credit use moderate, new applications/accounts temperate, and continue to pay on time, you should see few credit denials and receive among the strongest rates on credit you use.  (Mind you, things may get a smidgen better above 740.)

 

There's nothing magic about a 800+ score.  I'll repeat that, if necessary to make the point.

 

Of course, it's important to bear in mind that there's more than one FICO model.  Most lenders these days will use FICO 8 (or FICO 9, which typically differs only modestly).  Unfortunately, home lending is still based on older FICO 2/4/5 models (each version identifies a different CRA ... not true of later FICO models).  So it's important to be aware of these scores, as well (they can be purchased with your other FICO's from myFICO at a cost of $19.95 per CRA report.  Some lenders provide free mortgage FICO's as part of their customer service ... DCU provides FICO 5 monthly).

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9 hours ago, cv91915 said:

Most cards report the statement balance, but whatever is reporting as the current balance is what is scored for utilization.

 

$1 is enough, but some companies waive small balances of as much as $2, so we usually recommend $3 as the target so you don't have to remember which cards will zero out a $1 or $2 balance (leaving $0 reporting for that cycle).

 

Well, seems like I got the whole strategy wrong 😂

 

So I calculated that if I were to leave a $2 balance on my card with the lowest limit, I would have a 0.17% credit utilization. That said, how does the credit utilization score get affected by having  0% utilization vs > 0.17%?

 

Thanks in advance

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5 hours ago, hdporter said:

Of course, it's important to bear in mind that there's more than one FICO model.  Most lenders these days will use FICO 8 (or FICO 9, which typically differs only modestly).  Unfortunately, home lending is still based on older FICO 2/4/5 models (each version identifies a different CRA ... not true of later FICO models).  So it's important to be aware of these scores, as well (they can be purchased with your other FICO's from myFICO at a cost of $19.95 per CRA report.  Some lenders provide free mortgage FICO's as part of their customer service ... DCU provides FICO 5 monthly).

 

Thank you for shedding light on what score is good enough to allow me to qualify for decent rates over time.

 

Regarding the scoring system, I became aware of that after discovering which credit monitoring systems used Vantage vs FICO and what each lender group utilize. That is why I have a sub with myFico.com's FICO Premier service. They have a customer service department who is kind enough to answer questions, however, I find myself even more confused when they walk through reasons why I may see differences in scores between the different FICO versions or between different bureaus. The last myFICO.com agent I spoke to recommended that I leave a balance on all my cards, but keep the total below 30%. I didn't understand the strategy behind that recommendation, but her overall point was that unless the card reports a balance above $0, the credit utilization scoring system does not consider it at all.  

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I expect most here will agree with me that where myFICO agents don't know an answer, they'll take a stab in the dark at one before telling you they "don't know".

 

With respect to $0 balance revolving credit cards:  If a card goes without use for a length of time, it's considered to be dormant.  And, yes, dormant cards are ignored for FICO scoring.  The best guess at what constitutes "dormancy" is no activity for 6 months. 

 

So, the general advice bandied around here is that it's ok to show a $0 balance on a card account, but you want to show activity at least once every 6 mo.  Personally, I don't think it's necessary that the card report a balance ... just report a "last activity" date within the last 6 mo.

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When I was rebuilding, I had two cc’s reporting that I used every month and paid in full except for $2 - $5 on one card and 0 balance on the other. Mind you I had very low CL’s at the time. One month I decided to completely pay in full on both cards and my fico score from Myfico went down considerably. So, I called EX directly and asked them why my fico went down. The CSR said that reporting zero balances on all my accounts is interpreted as zero usage by fico algorithms. So, the next month I PIF both cc’s and let just $2 or $3 or $5 report and my fico jumped back up.

 

Whether that is the truth relayed to me by the EX CRS as to why my fico went down isn’t the point. All that really mattered to me at the time was that with a very limited credit history, ficos under 650 and small credit lines, this was the result of either allowing a small amount report on just one cc. or let zero balance report on all cc's.

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Just want to make clear that my last post had a specific focus on account dormancy (namely, that dormancy can be avoided by showing any account activity at least once every 6 months). 

 

Setting that aside, it's important to have at least one revolving balance reporting at any given time.  For maximum score benefit, that balance should be as low as possible ($2 min suggested).  This is what the AZEO strategy is targeted to.

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18 hours ago, credithoarder said:

 

So I calculated that if I were to leave a $2 balance on my card with the lowest limit, I would have a 0.17% credit utilization. That said, how does the credit utilization score get affected by having  0% utilization vs > 0.17%?

 

Thanks in advance

Simply put, that component of the score seems to be a binary...either there is a balance or there is not a balance.  The less than one percent is not relevant to that question.  Size of balance(s) becomes relevant further down the if/then/else trail when the algorithms look at the number of balances and how much is being used since we know that there are ranges viewed as sub-optimal.  

 

Some months back, I detailed the impact on an 850 of not having a revolving balance showing.  There was also a new account that had reported, but the only balance I had reporting on a card was the Plat balance.  Charge cards DO NOT get counted for AZEO purposes based on that sample size of one.  The next month, I gained back more than half of the ~25 point loss when I let some nominal balance report.

 

Having a balance showing does not mean you are paying interest on it.  If I have a $30 balance this month at the statement close, then as long as I pay $30 or more next month, there is no trailing interest (provided it is not some sub-sub-prime POS that charges interest beginning the day of posting- I don't have any of those). 

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18 hours ago, credithoarder said:

 

Thank you for shedding light on what score is good enough to allow me to qualify for decent rates over time.

 

Regarding the scoring system, I became aware of that after discovering which credit monitoring systems used Vantage vs FICO and what each lender group utilize. That is why I have a sub with myFico.com's FICO Premier service. They have a customer service department who is kind enough to answer questions, however, I find myself even more confused when they walk through reasons why I may see differences in scores between the different FICO versions or between different bureaus. The last myFICO.com agent I spoke to recommended that I leave a balance on all my cards, but keep the total below 30%. I didn't understand the strategy behind that recommendation, but her overall point was that unless the card reports a balance above $0, the credit utilization scoring system does not consider it at all.  

Think about it...front-line CSR's rarely understand corporate operations, but even if they did, it is not in the best interest of Fair Isaac if their phone/chat staff tell customers how to reverse engineer a proprietary algorithm that they spend decades developing.  Further, if customers don't know WHAT makes the score engines move, they will keep ponying up for the shiny bauble each month. 

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18 hours ago, credithoarder said:

So I calculated that if I were to leave a $2 balance on my card with the lowest limit

 

 

If your lowest-limit card is issued by Discovery, Wells Fargo and a handful of others, the $2 balance will get waived and you'll get a $0 balance statement and have $0 balance report.  That's why I suggested this:

 

18 hours ago, credithoarder said:

we usually recommend $3 as the target so you don't have to remember which cards will zero out a $1 or $2 balance (leaving $0 reporting for that cycle).

 

18 hours ago, credithoarder said:

That said, how does the credit utilization score get affected by having  0% utilization vs > 0.17%?

 

One card with 0.17% and the rest at zero is about as good as it gets.  All cards reporting $0 balance will cost you some points.  How many depends on what else is in your profile.

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Thank you guys for the clarification once again. 

 

I do make sure to use all of my accounts quite a bit throughout the billing cycle to ensure they do not go dormant. To my understanding, lenders like to see high usage and full pay offs on the cards. Especially if the goal is to aim for CLIs and better card offers.

 

One strategy that I use is to ring up 90% + on each card, then pay off the current card balance within 2-3days after they post. I rinse and repeat several times throughout the billing cycle right before the closing date. My rationale is to demonstrate to the lender that I have enough cash to pay off the maxed out limits on the card.  However, I am not sure if this balance management strategy provides any useful insight to the lenders CLI consideration. 

 

All that said, does the AZEO strategy satisfy both FICO scores and the individual lenders to see a credit score boost and be granted CLIs?

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Thank you guys for the clarification once again. 
 
I do make sure to use all of my accounts quite a bit throughout the billing cycle to ensure they do not go dormant. To my understanding, lenders like to see high usage and full pay offs on the cards. Especially if the goal is to aim for CLIs and better card offers.
 
One strategy that I use is to ring up 90% + on each card, then pay off the current card balance within 2-3days after they post. I rinse and repeat several times throughout the billing cycle right before the closing date. My rationale is to demonstrate to the lender that I have enough cash to pay off the maxed out limits on the card.  However, I am not sure if this balance management strategy provides any useful insight to the lenders CLI consideration. 
 
All that said, does the AZEO strategy satisfy both FICO scores and the individual lenders to see a credit score boost and be granted CLIs?

What's is being analyzed here is what we have known for years here on CB as The $2 Trick. It generally always works, at least on clean reports.

Your strategy of using 90% of your limit is probably good, but only if you have crap cards with toy limits. I'd like to see how you'd do that on a continual basis when you have limits of $25k, $50k, $75k and even $100k.

The $2 Trick is purely for your FICO Score. It's unlikely to be motivation for a bank to increase your credit limit in and of itself. Besides, the $2 / $3 is what reports on your credit reports. You an still use 90% of your limit and pay it off prior to statement date. It doesn't have to be your statement balance for your creditor to know you'd used your card.

Another point that is important to consider is that The $2 Trick works only when you have average to low credit limits. When you have elevated credit limits The $2 Trick will not work. For me to get a little score boost from having minimal utilization I have to use The $1,000 Trick. When I have a reported balance of under about $1,000, it's the same as $0. The sweet spot for me is between about $1,000 and $1,500. YMMV


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19 hours ago, PotO said:


Another point that is important to consider is that The $2 Trick works only when you have average to low credit limits. When you have elevated credit limits The $2 Trick will not work. For me to get a little score boost from having minimal utilization I have to use The $1,000 Trick. When I have a reported balance of under about $1,000, it's the same as $0. The sweet spot for me is between about $1,000 and $1,500. YMMV


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I plan to leave a $2 balance on my least used card so I don't accidently add charges right before the account settles. As long as I can manage to accelerate the trajectory of my credit score in an upward direction, I plan to continue using this strategy. Once I am at a favorable interest rate and credit limit offer, I don't plan on chasing credit cards any more.  My business is the only asset that will make use of credit in the long run.  

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17 hours ago, A Credit Ed said:

Hmmm - isn't this attitude against the TOS here at CB? Especially if your user name is credithoarder?🙂 

 

Lol, I did realize the irony in that after I submitted my post.  However, even though I don't plan on chasing credit cards, I hope my credit status becomes good enough to where prime offers start coming my way. 

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For clarification, what is the consensus for the targeted total utilization percentage for this strategy?

 

The $2 Trick is throwing me off as it can reflect 0% utilization for portfolios with large balances or > 0% for smaller balances. Or is this variable moot to helping boost scores for low to mid level credit scores?

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For clarification, what is the consensus for the targeted total utilization percentage for this strategy?
 
The $2 Trick is throwing me off as it can reflect 0% utilization for portfolios with large balances or > 0% for smaller balances. Or is this variable moot to helping boost scores for low to mid level credit scores?

Don't worry about that. Just let one card report a $2 ($3 if it's a Discover card) balance and every other card report a $0 balance.

Although it's not germane to the issue, FICO algorithms have a unique way of calculating global utilization at times. When I let a $2 balance report it shows 1% utilization when, in fact, it should be 0.00015%.


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