Paying off credit card early and leaving $0 balance

[Anonymous]

Does paying off my credit card early and leaving a $0 balance before the statement is released hurt my credit score or improve it?

[Anonymous]

Is this your only credit card?  FICO imposes a scoring penalty for having all your cards at $0.  You can fix that by having one card showing a small balance.

In general paying down CC debt is good.  Just not good to have all cards at $0 at the same time.

[Moneyklutz]

It will if thats your only credit card. Just for giggles I did that two months ago with all my CC's to see the effect on my scores and all three CB's dinged me around 10 points. After going back to my normal routine in paying all off but one prior to my statement dates and allowing that one to report at less than 9% of total utilization this month, I've seen the score bump back up on TU and EQ already...still waiting for the EX report to update.

Tons of info here on the board about how to do this but yeah... they like to see that you can use credit responsibly, not just have it!  =)

[SouthJamaica]

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@Anonymous wrote:

Does paying off my credit card early and leaving a $0 balance before the statement is released hurt my credit score or improve it?

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Generally it helps, but if you have multiple cards it's better to let one of them report a small balance

[Anonymous]

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@Anonymous wrote:

Is this your only credit card?  FICO imposes a scoring penalty for having all your cards at $0.  You can fix that by having one card showing a small balance.

In general paying down CC debt is good.  Just not good to have all cards at $0 at the same time.

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I never understood why this is a bad thing.  To me this means you are managing your money properly and not going into debt?

Just curious why is it so bad to have $0 reported?

[Anonymous]

FICO has no memory, so it is just seeing the exact snap shot in time of your revolving balances when your score(s) are generated.  If you have all $0 balances, that snap shot says that you aren't using any revolving credit at all.  If you aren't using it, you aren't showing that you can use it responsibly.  This is why a minor scoring penalty is taken on if you don't show at least one small balance.

[SouthJamaica]

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@Anonymous wrote:

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@Anonymous wrote:

Is this your only credit card?  FICO imposes a scoring penalty for having all your cards at $0.  You can fix that by having one card showing a small balance.

In general paying down CC debt is good.  Just not good to have all cards at $0 at the same time.

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I never understood why this is a bad thing.  To me this means you are managing your money properly and not going into debt?

Just curious why is it so bad to have $0 reported?

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Nobody said it's a bad thing to be totally debt free. In my opinion it's a great thing.

[Anonymous]

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@SouthJamaica wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Is this your only credit card?  FICO imposes a scoring penalty for having all your cards at $0.  You can fix that by having one card showing a small balance.

In general paying down CC debt is good.  Just not good to have all cards at $0 at the same time.

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I never understood why this is a bad thing.  To me this means you are managing your money properly and not going into debt?

Just curious why is it so bad to have $0 reported?

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Nobody said it's a bad thing to be totally debt free. In my opinion it's a great thing.

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Sorry, I wasn't saying you think it's a bad thing.  More meant why does FICO treat it bad.

[SouthJamaica]

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@Anonymous wrote:

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@SouthJamaica wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Is this your only credit card?  FICO imposes a scoring penalty for having all your cards at $0.  You can fix that by having one card showing a small balance.

In general paying down CC debt is good.  Just not good to have all cards at $0 at the same time.

---

I never understood why this is a bad thing.  To me this means you are managing your money properly and not going into debt?

Just curious why is it so bad to have $0 reported?

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Nobody said it's a bad thing to be totally debt free. In my opinion it's a great thing.

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Sorry, I wasn't saying you think it's a bad thing.  More meant why does FICO treat it bad.

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I don't know but I have a theory.

My theory is that FICO pretends to be just about risk avoidance, but it is also really about profitability. Debt free folks who prefer owing no money to lenders aren't the most profitable customers, so some FICO algorithms (notably FICO 8) downgrade them a bit whenever (a) they have no credit card balance and/or (b) no open installment loans.

[Anonymous]

Whether it has anything to do with profitability is debatable, but what isn't debatable is that all it takes is a tiny balance (be it on a revolver or installment loan) to get around the scoring "penalty" associated with either.