Financial position radically improving and FICO score deteriorating

[Anonymous]

Hello there,

 Thanks for replying.

    I have not calculated it out because I always pay the balances in full. I doubt it would be very much. It is just irritating to apparently be penalized for paying my bills as agreed. Of course, obviously I know that if everyone could, and/or would pay off their CC balances each month, card issurers would LOSE a huge amount of income.

Lost interest, over-the limit fees, late fees, etc.

Oh Boo Hoo!!!!!!!!!!!

[creditwherecreditisdue]

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@Anonymous wrote:

Hello all,

   I have two credit cards, both of which report to the credit bureaus the CURRENT status of the account on the Statement Closing Date of each month. Now, I have two choices. I can PAY IN FULL each month, but then a $0 balance will be reported, OR I can carry over a small balance, but then I will pay interest. That infuriates me as interest is wasted money. I actually had a conversation with Craig Watts from FICO a couple of years ago, and he told me that an account with a $0 balance will eventually be disregared by the scoring formula if the balance stays at $0.

And then I hear both Suze and Liz make statements like "You don't have to pay interest to get a good credit score, or something like that".

Any input?

Thank you,

John

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Why? As long as the previous balance is PIF by the grace date you will not pay any finance charge. And yes, you do not want your accounts to become dormant or even worse closed for disuse. You do not have to pay finance charges to have excellent credit. There are many member of this board with high FICO's who never pay a cent.

[Anonymous]

Yes, you are correct about not paying any interest. But if I do that, it will report a zero balance to the CB's.

Almost every lender reports the status of an account based on the statement that is generated each month. However, in some cases, the information being reported is from statement from the month before.

[creditwherecreditisdue]

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@Anonymous wrote:

Yes, you are correct about not paying any interest. But if I do that, it will report a zero balance to the CB's.

Almost every lender reports the status of an account based on the statement that is generated each month. However, in some cases, the information being reported is from statement from the month before.

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You are most definitely wrong in this regard. There is a way to manage every account so that it will report a balance and you do not pay a finance charge.

[Anonymous]

Actually I am not. My credit card statement is closed on the 20th of each month. On that day, a report is sent to the CB's of the current status of the account. If by that day, you have paid ALL outstanding amounts, based on your online statement, a $0 balance will be reported to the credit bureau.

[Anonymous]

So the bottom line is: Even though you may be using the account on a regular basis, said account reporting with a zero balance is worse than having a small balance on it, correct, at least as far as credit scoring is concerned.

Is that correct?

[creditwherecreditisdue]

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@Anonymous wrote:
Actually I am not. My credit card statement is closed on the 20th of each month. On that day, a report is sent to the CB's of the current status of the account. If by that day, you have paid ALL outstanding amounts, based on your online statement, a $0 balance will be reported to the credit bureau.

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I already explained this to you. Allow the statement to show a balance. When the TL is subsequently reported to the CRB's it will show a balance. If you pay the balance shown on the statement by the grace date (due date) you will not incur a finance charge. It really is that simple.

[Anonymous]

I agree with that. I apologize as this particular credit card does not have any type of grace period. Interest begins to accure on the day the charge is posted to the account. However, with any type of credit card, the balance that gets reported needs to be more than 0%, but less than 10% of the CL to be counted in the score, but yet not have a negative impact on the score, correct?

Thank you for your time.

[creditwherecreditisdue]

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@Anonymous wrote:

So the bottom line is: Even though you may be using the account on a regular basis, said account reporting with a zero balance is worse than having a small balance on it, correct, at least as far as credit scoring is concerned.

Is that correct?

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Optimal credit utilization for FICO scoring purposes is:

• Total revolving utilization > 0 and <= 9%, the lower the better, and
• Reporting a balance on less than half of your revolving TL's, and
• Reporting a balance on half or less of all TL's.

Anyway you get there is fair game. You only need have one revolving TL report a balance.

Avoiding account closure for disuse is another matter. You only need use the card periodically to do this, but do not need to allow it to report a balance. Most accounts should be used once every three months, particularly accounts issued through HSBC. (HSBC is noted for hair trigger closures for disuse without notice.)  Some store cards can remain unused for a considerably longer period before they are closed. Beware, though, that no issuer likes to see their card remain totally unused for long periods of time.

[creditwherecreditisdue]

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@Anonymous wrote:

I agree with that. I apologize as this particular credit card does not have any type of grace period. Interest begins to accure on the day the charge is posted to the account. However, with any type of credit card, the balance that gets reported needs to be more than 0%, but less than 10% of the CL to be counted in the score, but yet not have a negative impact on the score, correct?

Thank you for your time.

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What CC that you have has no grace period?