SubscriberWise Founder and FICO Professor Howe Offers Annual Credit Advice for Holiday Shoppers

NEW YORK, Dec. 24, 2018 /PRNewswire-PRWeb/ -- SubscriberWise, the nation's largest issuing consumer reporting agency for the communications industry and the leading protector of children victimized by identity theft nationwide, announced today that the company founder and USA child identity guardian is encouraging the adult credit consuming population to remain mindful of credit utilization and its impact on FICO scores during the holiday spending and debt season.

"According to FICO, credit utilization is one of the five primary factors – or leaves - in the calculation of a FICO score," said David Howe, founder of SubscriberWise. "It's also one of the most significant categories in the calculation of a FICO score because scientific analysis of millions of credit files has demonstrated it one of the most predictive factors."

"The general concept of utilization is basic and straightforward," continued Howe. "However, because scoring algorithms make distinctions among various types of credit obligations (i.e. revolving, installment, mortgage) and because there are derogatory and non-derogatory scorecards that consumers are segmented into during the calculation of a credit score (i.e. FICO's latest model has more than a dozen unique scorecards), there's no single formula for utilization as it relates to the specific impact on the calculation of credit score.

"Utilization is the ratio of the outstanding balance(s) reported on a credit report as a percentage of the aggregate or total amount of reported available credit. It's also a single measurement of debt-to-limit (aka utilization) for each individual account. According to FICO, utilization is the amount of your available credit that you are using at the very moment your score is calculated.

"And that's the basic and straight-forward explanation," emphasized Howe.

"The complexities of utilization (and credit scoring in general) are coded into the algorithm which, among other things, simultaneously measures the utilization for each credit account individually as well as the aggregate across all credit lines. It's also known that a single account is scored differently than two or more accounts with balances reported. And notwithstanding multiple scorecards which are automatically selected when the score is requested, there are predictive distinctions related to the impact of utilization based on installment vs. mortgage vs. revolving obligations."

Related: FICO Czar Howe Challenges 'Credit Experts' After Alleging CNBC's Yoni Blumberg Misreports the Myth Correctly Dispelled by FICO's Ethan Dornhelm -- https://www.marketwatch.com/press-release/fico-czar-howe-challenges-credit-experts-after-alleging-cnbcs-yoni-blumberg-misreports-the-myth-correctly-dispelled-by-ficos-ethan-dornhelm-2018-08-31

"For example, having a utilization or debt-to-limit ratio of 80 percent reported on an installment loan is much different than a debt-to-limit ratio of 80 percent reported on a revolving credit card regarding the impact on the credit score. In fact, an installment loan that's paid as agreed but with a remaining high utilization and at least six months of reported positive payment history will have a minimal (negative) impact on the calculation of a credit score. On the other hand, a utilization ratio of 80 percent on a revolving credit obligation will have a significant (negative) impact on the calculation of a credit score - true even for consumers who otherwise have spotless and well-established credit histories.

"The takeaway for consumers is not to fear utilization," insisted Howe. "Rather it's to recognize that this is one of the important categories in the calculation of a credit score. Consumers should understand how it works and how to manage it."

"It's also worth noting that there are few 'tricks' or hard-and-fast-rules with credit scoring," concluded Howe. "Fortunately, though, there are proven strategies that consumers can pursue to maximize their scores."

The following will ensure favorable credit scores for consumers everywhere:

• Pay every account according to the terms
• Maintain favorable utilization ratios by keeping revolving balances low (less than 10 percent but greater than 0 percent)
• Pay down revolving debt and strive for the lowest utilization possible before applying for loans where terms are most favorable with high FICO scores (740 FICO or higher) in particular
• Open new credit cards reluctantly and only when necessary (opening new accounts typically generates hard inquiries, and it also impacts the average age of the credit file; short term it may result in a negative impact on the calculation of a credit score).
• Whenever possible and assuming the overall credit is favorable, apply for credit with one active installment loan and one credit card with a low balance relative to the credit limit (Howe has proved this one of the very best scenarios to maximize points).

About SubscriberWise

The nation's first Issuing consumer reporting agency (CRA) for the communications industry, SubscriberWise® employs enhanced Subscriber Level Segmentation technology to precisely identify credit challenged subscribers to ultra-high achievers to maximize sales and boost profits. By incorporating years of communications performance data and proprietary decision models, SubscriberWise delivers unprecedented predictive power with a fully compliant, score-driven decision management system. Combined with Red Flag compliance and operator-controlled rules, SubscriberWise analytics empower CSR's to instantly and accurately respond to payment and credit characteristics with appropriate options for every subscriber. With SubscriberWise, no subscriber request is ever denied because of credit risk factors.

SubscriberWise contributions to the communications industry are quantified in the billions of dollars annually.

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SOURCE SubscriberWise