Balance Transfer Arbitrage

If you haven’t heard of FICO 08, then you haven’t been keeping up with the latest credit related news my friend! FICO 08 is the new calculation methodology of the Fair Isaac Corporation in determining your credit score and it will likely lower the credit scores of all balance transfer arbitragers everywhere, with very little you can do about it. Among the things that it changed, many of which aren’t terribly important for the sake of arbitrage, is how it emphasized the negative impact of utilizing too much of your credit limit. That is, starting this year, having a higher percentage of your credit limit used, a hallmark of a balance transfer arbitrager will hurt you more than it did last year.

Also, and less impactful, is a change in how different types of credit lines affect your score. Having a greater variety of credit lines such as auto loans, mortgages, and credit cards; is better than having a lot of credit in a single type. In other words, having a lot of credit via unsecured credit cards is not as good as having a nice mix of auto, mortgage and credit.

How can you adapt? Unfortunately, it doesn’t appear like there’s much you can do to “improve” your score but it still helps to understand the new rules.