Is FICO partially to determine if you are a good customer (aside from creditworthiness)?

Question

I have a suspicion that FICO scores were designed not only to determine creditworthiness, but to determine if you are a good customer that the credit card company will make money on.

In my example, I have a history of opening cards, using them once, and cancelling them. I do this to get 10% off something, or 20,000 frequent flyer miles, or other freebies. My credit report is the size of a small novel. A lot of times, I do it to the same credit card company more than once.

However, in the past decade, I have never had a late payment or adverse report. My credit report is the size of a russian novel, but everything is clean. My debt ratios are low.

Because of this, my credit score will probably never be above the mid-700s, which isn't bad enough to make me stop my behavior, but it pisses me off that I'm being dinged for stuff that has nothing to do with creditworhiness.

Answer 1

One factor is length of credit, that is the longer you have credit lines open the better it looks for your score. Once you close a card out it no longer becomes a factor in your length of credit history. So if you open a card, use it once and close it you will have a very short credit age. That is, in "scoring" you are being treated like people who have only had an account open for a couple of months, rather than a couple of decades. It has nothing to do with if you are making them money or not. If these cards do not have an anuual fee, then there is no harm in keeping them open. If you use them and just pay them off every month you still are not paying any extra in terms of interest or fees and it would help your score even more.

The mid-700's are good and you are in a pretty good position to get the top rates available.

From the myfico.com site here are the breakdowns in percentage of the population for each score.

to 499 - 2%
500-549 - 5%
550-599 - 8%
600-649 - 12%
650-699 - 15%
700-749 - 18%
750-799 - 27%
800+ - 13%

Answer 2

FICO score is strictly credit rating and nothing to do with rating you as a customer.

I'm sure the volume of those opened and quickly closed credit cards has a negative impact on your score. It could be that you lack history. But the volume of tradelines IS part of your creditworthiness.

If you don't plan to buy a house or don't care what kind of mortgage interest rate that mid 700 score will get you, just continue to take advantage of thse special discount offers. It's much better to close extra credit card accounts than to try and keep track of all those open accounts you don't use.

Oh and to the responder who said most people don't have scores in the 700, you are so wrong. Most folks I know have scores in the 800 or high 700. Paying your bills late or not at all will get you scores below 700.

Answer 3

FICO is a credit score scale used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.

Answer 4

very few people ever get anywhere near mid 700's you sound like you think that's a low score