01-15-2013 06:29 AM
Here is some interesting advice a FICO expert told me. I am interested in knowing if people in the community agree:
Instead of just putting unused Credit Cards in the sock drawer or using them every three months just to stay on the good side of the credit card companies, INSTEAD my friend, who works in the Credit Department of a local bank, told me to slightly overpay your credit card by a few dollars and don't ask for a refund for the credit balance. The credit reporting agencies will report a zero balance but because you have a credit balance they have to report for each month there is a balance on the account regardless if you use it or not. On the other hand if you just put the unused credit card in the sock drawer and don't use it with a true zero balance the credit card companies will not report anything that month at all giving the impression you are not using credit and thus hurting your FICO Score.
What do you think of my friends advice? Analysis?
01-15-2013 07:18 AM
I don't know about that trick, but I know for sure that my unused $0 balance CCs report monthly. They will still add an "OK" tick in the payment history and update the reported date. Now FICO won't ding you for non-CC use (assuming you don't have all $0 balances on all of your credit accounts). But FICO will ignore a CC due to inactivity after several months and the part that is ignored is the balance and CL from my understanding. Age for sure still factors in. I don't know if an overpayment monthly would stop that inactivity or not. In the past I have overpaid my CCs and they automatically refunded me the $$$ after 2-3-4 months whether I wanted that or not.
Not using a CC won't hurt your FICO though. You still get credit for the mix of credit, impact upon your scoring bucket, impact to length of history and AAoA. Even the payment history is still factored in. I know that util can be impacted over time though if not used for several months (an unknown in FICO scoring...might be 6 months), but that only matters if you are carrying balances on your other CCs.
01-15-2013 11:38 AM
It's my experience that credit cards consistently report every month. I have just checked for both Amex and non-Amex. I make the distinction because Amex is in some situations an exception from Visa, MC, Discover etc. Amex for instance updates the activity date only when a statement balance is larger than zero, while others do it also if such a balance has have been zeroed before the statement date. Here is, if I remember correctly, where it gets really funny, because when a month of no use follows a month of a larger than zero balance, a zero balance will be reported. But that's not what people have in mind when saying that a card reports a balance, just as carrying a balance means one thing to some and another to others.