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Regular Contributor
Duke-of-Earl
Posts: 212
Registered: ‎06-20-2009
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Are Zero Balances Interpreted as Non-Use?

Following advice read on this forum (and much appreciated), I've been paying off all accumulated charges in advance of each credit card's statement closing date, so that zero balances are reported.  (We don't seem to have a good abbreviation for this.  It's not just PIF; maybe it's "pre-PIF"?)  I do leave a token $10 balance on one card.
 
So this worked pretty well for me, maximized my scores as much as possible, and I got the mortgage I wanted on favorable terms.  But what now?  I'm wondering whether the last ten months of zero balances showing on most cards will eventually have some negative impact on my score.  The CCCs know I'm using the cards, but aren't the zero balances likely to be interpreted in scoring as just plain not using those cards?  Specifically, how is the item "You've shown recent use of credit cards" on my EQ Score Power report derived?  Does the "Date of Last Activity" figure into it?

The information is there in the actual report so that anyone who cares to look can see I'm making substantial payments.  The "Actual Payment Amount" shows these correctly (except for AmEx, boo), but I suspect nobody looks at anything but the (zero) balance due.

Would it be a good idea to let the balances report and then PIF subsequently for a few months?  Or should I rotate a single balance due among my cards, with the rest "pre-PIFed" to report zero?  I don't plan to apply for any new credit in the near future.

 


Starting Score: EQ 804 - (April 2009)
Upgraded thanks to FICO Forums: EQ 813 / EX 842 / TU 823 - (FICO scores from mortgage lenders, June 2010)
Recent Scores: EQ 807 / TU 799 - (March 2012)
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chasmith
Posts: 1,062
Registered: ‎05-26-2010
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Re: Are Zero Balances Interpreted as Non-Use?

I f you're concerned about this, why not rotate which account you leave a small balance on, perhaps even do so on a rotating  two or three each month?  I've seen comments (variously) to the effect that "more than half" to two thirds of credit cards should have zero balances, with total utilization below 9% and each card with a balance utilized below 9%.

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my-own-fico
Posts: 1,303
Registered: ‎01-05-2010
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Re: Are Zero Balances Interpreted as Non-Use?

[ Edited ]

A few months ago I made heavy use of the abbreviation PBS (Pay Before Statement date), but stopped doing it because since the myFICO list of abbreviations wasn't updated to include it at the time of momentum, no one would later know what I was talking about.

 

The abbreviation PIF simply means to Pay In Full, but has this undertone that the due date is implied. Same thing with opting out; it's implied that it's opting out of receiving  credit card offers, because in these forums it's rarely used in any other context. Like with young kids who always eat say Cocoa Krispies for breakfast and drink say Sprite. They may not know the concepts cereal and soft drink.

 

Then there's to carry a balance, which means that you don't PIF by the due date, but carry over to the next billing cycle and pay interest. Some use the term if your statement lists a balance that's not zero.

 

Not to mention the phrase of reporting a balance, as in it's recommended to let only one card report a balance. It took me months to understand what people meant by that. It means the balance is greater than zero. I assume the CCCs actually report monthly balances even when they are zero.

 

I need to stop waking up early on Sunday mornings. :smileywink:

 

As for leaving a card's monthly balance at zero forever, I think inactivity is determined by a separate flag that the CCCs report to the CRAs. Someone in these forums likely knows for sure.

 

Are you living within your means?
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GregB
Posts: 1,669
Registered: ‎05-24-2007
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Re: Are Zero Balances Interpreted as Non-Use?

I think we can all agree that your FICO score is calculated ONLY by the information contained in your report at that moment. There is no "memory" in FICO. If you have a big balance report one month that drops your FICO, you will get all those points back as soon as the information on your report looks exactly like it did before the score change. There is some info that changes and does remain such as age of accounts, age of negative information, etc. As you pay off Mortgage and Installment accounts, the balances always go down, but this changes your score very slowly. It may take a year for a Car Loan, and several years for a Mortgage, to move your score at all.

 

There is another item that can change and then stay on your reports for a while: Recent High Balance. This should make it obvious to any manual review that you are using an account that reports a $0 balance but you would have to let it generate a statement to change that number. I don't have any info that makes me believe that Recent High Balance is factored into FICO.

 

I don't see any reason to pay before the statement cuts on all your accounts. Why don't you let at least generate a statement and then pay before the due date? IF you lose any points, they all come back pretty quickly if you pay before the statement date. If you already have your mortgage and are not applying for new credit in the next month or two, what are you gaining by playing the game of paying before statement date?

 

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my-own-fico
Posts: 1,303
Registered: ‎01-05-2010
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Re: Are Zero Balances Interpreted as Non-Use?

 


GregB wrote:

I don't see any reason to pay before the statement cuts on all your accounts. Why don't you let at least generate a statement and then pay before the due date? IF you lose any points, they all come back pretty quickly if you pay before the statement date.

 


But then you essentially have to pay for two months in one month, and that's often hard to do on short notice.

 

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andyaycw
Posts: 298
Registered: ‎07-25-2007
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Re: Are Zero Balances Interpreted as Non-Use?

I was under the impression that to remain an "active" account for FICO scoring purposes, you should at the very least let each of your accounts report a balance once every six months. This is based on my understanding that after 6 months of no activity (or 6 months of reporting a zero balance), FICO would consider that account inactive and would no longer factor it into your credit profile when calculating your FICO score.

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marty56
Posts: 5,696
Registered: ‎10-06-2007
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Re: Are Zero Balances Interpreted as Non-Use?


andyaycw wrote:
I was under the impression that to remain an "active" account for FICO scoring purposes, you should at the very least let each of your accounts report a balance once every six months. This is based on my understanding that after 6 months of no activity (or 6 months of reporting a zero balance), FICO would consider that account inactive and would no longer factor it into your credit profile when calculating your FICO score.

All accounts are factored into your score.  Closed accounts are still helping your AAoA.  It has been stated that FICO will ding you if you allow a balance to report on a card that hasn't reported a balance in several months.  IMHO the biggest treat with an account that isn;t being used is the CCC might close it and if you revolve balances, this could have a large impact on your FICO score.

11/28/2014 FICO: EQ: 796 EX:788 TU:803
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Creditaddict
Posts: 22,067
Registered: ‎10-23-2007
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Re: Are Zero Balances Interpreted as Non-Use?

Really you only need to worry about what is reporting to your credit reports for balances when you are getting ready to apply for mortgage or car, but seeing as you did that already and your scores are in the 800's I would not drive your self crazy trying to do this each month unless you just charge so much you would be at your limit each month.

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Regular Contributor
Duke-of-Earl
Posts: 212
Registered: ‎06-20-2009
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Re: Are Zero Balances Interpreted as Non-Use?

 


my-own-fico wrote:

As for leaving a card's monthly balance at zero forever, I think inactivity is determined by a separate flag that the CCCs report to the CRAs. Someone in these forums likely knows for sure.

 


 

I would be very interested to learn about that if someone knows the details of it.

 

Nice try on the abbreviations.  Maybe worth another try sometime.

 

I need to stop waking up late on Sunday afternoon!. :smileywink:

 


Starting Score: EQ 804 - (April 2009)
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Regular Contributor
Duke-of-Earl
Posts: 212
Registered: ‎06-20-2009
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Re: Are Zero Balances Interpreted as Non-Use?

[ Edited ]

 


GregB wrote:

I think we can all agree that your FICO score is calculated ONLY by the information contained in your report at that moment. There is no "memory" in FICO. If you have a big balance report one month that drops your FICO, you will get all those points back as soon as the information on your report looks exactly like it did before the score change. There is some info that changes and does remain such as age of accounts, age of negative information, etc.

 

Good point.  You could say the AAoA etc are also non-memory items since the base dates are in the report.  But then I think we have to conclude that a statement like "You've shown recent use of a credit card" can only mean there is at least one non-zero balance listed IN THIS REPORT.  Right?

 

I don't see any reason to pay before the statement cuts on all your accounts. Why don't you let at least generate a statement and then pay before the due date? IF you lose any points, they all come back pretty quickly if you pay before the statement date. If you already have your mortgage and are not applying for new credit in the next month or two, what are you gaining by playing the game of paying before statement date?

 

Well, that was the thought behind my question.  Trying to get back to normal, but after months of mortgage madness, I forgot what normal is. 

 


 


Starting Score: EQ 804 - (April 2009)
Upgraded thanks to FICO Forums: EQ 813 / EX 842 / TU 823 - (FICO scores from mortgage lenders, June 2010)
Recent Scores: EQ 807 / TU 799 - (March 2012)
Goal: Survive Another Day
Take the FICO Fitness Challenge

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