cancel
Showing results for 
Search instead for 
Did you mean: 

Reporting a zero balance.

tag
dp246
Established Member

Reporting a zero balance.

About one month ago, I unintentionally let the balance on my credit cards report at zero (zero balance on all my accounts). As a result, my fico score dropped a bit (approximately 10 points). In the future, if I continue to let the balance report at between 1% - 9%, how long will it take for my fico score to jump back up and gain the approximately 10 points I had lost? If anybody has has had this experience (or is knowledgeable on this subject) and can let me know, I would appreciate it. Smiley Happy   

Message 1 of 10
9 REPLIES 9
Anonymous
Not applicable

Re: Reporting a zero balance.

Yes that is true, from a FICO scoring standpoint having all your CC's reporting a 0 balance (0% util) will usually hurt your score, for some it's 2 points and others it could be up to 15-20 points YMMV. (FICO likes to see some util, best case 1-9% on only one CC)

 

You will also read posts that says that FICO has no memory when it comes to util, but from my experiences, FICO does have a memory.

 

Example........

 

I always let one CC report a balance, keeping me at 1% util, and once I let it report 9% util and my scores dropped about 9 points, but the very next month when that CC went back to reporting 1% util, my scores went right back up exactly to where they were.

 

So I would tell you, as soon as the CC that you use for your util purposes reports a balance again (assuming you get your util exactly back to where it was) your scores will go right back up to where they were, of course this is a YMMV type of thing.

 

Best of Luck.

 

Happy Holidays.

 

Message 2 of 10
Anonymous
Not applicable

Re: Reporting a zero balance.

So what I'm hearing is that even though I have four credit cards with a combined credit limit of $3,000, I should only charge $10 to $90 in any given month.  I guess I could buy gas for the car once a month.  I started with just one credit card, a secured one through my bank, because when I went to purchase a home, two differenct lenders told me that I did NOT have a credit score.  Not bad, not low, no score at all.  I made purchases and paid them off in full each month, with no signs of improvement in a credit score.  I read that anyone can manage a single card, but your FICO score benefits from showing you can manage more than one credit card.

 

I kept the balance of all the cards at 30% or less at all times.  I paid the balances mid-month before they were due.  Without any rhyme or reason, my score has been going up and down 5 points each month.  The last couple of months I left all the cards with a zero balance, and guess what?  My FICO score went down 10 points.

 

Don't even get me started with FICO-8 credit card score vs a true credit score or how each of the big 3 vary by 40 to 50 points, sometimes even more.  I'm frustrated to say the least.  I guess I'll charge something for $10 each month, and see what happens.  I think its all a nut and shell game.  Creditors benefit from you having a low score.  I thought I was doing something right when last month Legacy Visa sent me a letter stating what a great customer I've been, so they doubled my credit limit. 

 

It would be nice to have access to how the scores (formulas) really work.  I'm good at math, but I can't find a pattern in my FICO scores.

Message 3 of 10
Anonymous
Not applicable

Re: Reporting a zero balance.


@Anonymous wrote:

So what I'm hearing is that even though I have four credit cards with a combined credit limit of $3,000, I should only charge $10 to $90 in any given month.  I guess I could buy gas for the car once a month.  I started with just one credit card, a secured one through my bank, because when I went to purchase a home, two differenct lenders told me that I did NOT have a credit score.  Not bad, not low, no score at all.  I made purchases and paid them off in full each month, with no signs of improvement in a credit score.  I read that anyone can manage a single card, but your FICO score benefits from showing you can manage more than one credit card.

 

I kept the balance of all the cards at 30% or less at all times.  I paid the balances mid-month before they were due.  Without any rhyme or reason, my score has been going up and down 5 points each month.  The last couple of months I left all the cards with a zero balance, and guess what?  My FICO score went down 10 points.

 

Don't even get me started with FICO-8 credit card score vs a true credit score or how each of the big 3 vary by 40 to 50 points, sometimes even more.  I'm frustrated to say the least.  I guess I'll charge something for $10 each month, and see what happens.  I think its all a nut and shell game.  Creditors benefit from you having a low score.  I thought I was doing something right when last month Legacy Visa sent me a letter stating what a great customer I've been, so they doubled my credit limit. 

 

It would be nice to have access to how the scores (formulas) really work.  I'm good at math, but I can't find a pattern in my FICO scores.


You can charge more than 10-90 every month. If you have a 3k limit charging around 290+ dollars should be fine. Just keep your utilization under 10%. Also, every card has a specific report date. If you pay part of your statement balance before the report date, you can keep the reported balance each month low. Once your credit limit is significantly higher than 10% of your monthly spend, you can stop worrying about it and just PIF your cards once the statement cuts and just ensure a small balance is left on at least one of your cards before the report date. This is pretty easy to manage since many cards report on the date their statement is cut. As long as one of your cards works this way and you charge something to it and PIF after the statement date and before the due date, you will always have some balance and never pay interest. 

 

Moreover, credit utilization history does not matter. The moment one of your cards reports a balance your credit score should jump back up. Moreover, according to much more knowledgeable people than me, it is optimal to leave a small balance only on one card on the report date (never pay interest so pay before due date). I usually have 6-8 cards reporting a balance each month (all PIF and all with no interest due to payment before due date), which is fine for those of us who want excellent credit; however, to push credit to perfect or near perfect scores, you want only one card reporting a small balance. Finally, avoid having any one card report high utilization. Optimally, all cards will report under 10%. But at least try to keep them all under 30% and your total utilization under 10%.

 

Also there are several types of credit scores. Broadly they are broken down into FICO scores from FICO and FAKO scores from other sites (including the bureaus themselves). FICO scores are broadly used while FAKO scores (non-FICO scores) are much less used. With that said, there are many versions of FICO scores. The scores used on this site are most often the scores CC lenders use when making decisions (not always). However, you have auto enhanced FICO scores, Mortgage enhanced FICO scores, and various versions of each FICO score. This site provides the FICO 8 score which is the only FICO score currently available to borrowers far as I know. 

 

Finally, as for exact formulas, they are likely proprietary. Giving up the formulas would effect their bottom line and ability to make money by selling scores (I am guessing). They do tell us what they take into account and roughly how it weighs which is enough for us to figure out how to improve credit in a general sort of way. 

 

Message 4 of 10
MarineVietVet
Moderator Emeritus

Re: Reporting a zero balance.


@Anonymous wrote:

So what I'm hearing is that even though I have four credit cards with a combined credit limit of $3,000, I should only charge $10 to $90 in any given month.  I guess I could buy gas for the car once a month.  I started with just one credit card, a secured one through my bank, because when I went to purchase a home, two differenct lenders told me that I did NOT have a credit score.  Not bad, not low, no score at all.  I made purchases and paid them off in full each month, with no signs of improvement in a credit score.  I read that anyone can manage a single card, but your FICO score benefits from showing you can manage more than one credit card.

 

I kept the balance of all the cards at 30% or less at all times.  I paid the balances mid-month before they were due.  Without any rhyme or reason, my score has been going up and down 5 points each month.  The last couple of months I left all the cards with a zero balance, and guess what?  My FICO score went down 10 points.

 

Don't even get me started with FICO-8 credit card score vs a true credit score or how each of the big 3 vary by 40 to 50 points, sometimes even more.  I'm frustrated to say the least.  I guess I'll charge something for $10 each month, and see what happens.  I think its all a nut and shell game.  Creditors benefit from you having a low score.  I thought I was doing something right when last month Legacy Visa sent me a letter stating what a great customer I've been, so they doubled my credit limit. 

 

It would be nice to have access to how the scores (formulas) really work.  I'm good at math, but I can't find a pattern in my FICO scores.


Welcome to myFICO.

 

Everyone's situation is different and there is no one size fits all approach to this and therefore no "ideal" number but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

Along with individual and overall utilization, FICO also scores the number of all types of accounts reporting a balance.at any one time Making sure less than half of all your accounts report a balance helps most people.

Now this approach really isn't necessary if you're not looking to apply for any credit in the near future or unless you are trying to tweak your score for maximum effect but some folks do this as a hobby just to see how high they can get their score.



Message 5 of 10
Anonymous
Not applicable

Re: Reporting a zero balance.

One question.

 

My total cl is $30'500. all cards are near 0 (around $150 at the moment with a bit on each card).

 

To make my score higher, if i understand correctly, I need to have 2 cards with 0 balance and one card with 1-9% (% of the card cl or my general cl?)

 

Mean, if i don't use my cards anymore, my balance will be less than 1%, so is possible it can hurt my score or not? Or should I have a balance of $300.50 min?

 

Thanks!

Message 6 of 10
sarahlee7
New Contributor

Re: Reporting a zero balance.


@Anonymous wrote:

One question.

 

My total cl is $30'500. all cards are near 0 (around $150 at the moment with a bit on each card).

 

To make my score higher, if i understand correctly, I need to have 2 cards with 0 balance and one card with 1-9% (% of the card cl or my general cl?)

 

Mean, if i don't use my cards anymore, my balance will be less than 1%, so is possible it can hurt my score or not? Or should I have a balance of $300.50 min?

 

Thanks!


Holy 4 yr old thread batman....Smiley LOL

 

You want as few cards reporting a balance as possible.  Optimally, 1 card reporting 1-9% of total available credit.

Message 7 of 10
Anonymous
Not applicable

Re: Reporting a zero balance.

LOL! Thanks! Yeah, I use google to search on the forum! So I will see how it goes! I just have $140 on one card now! Thanks for the tip! Smiley Happy

Message 8 of 10
tonyjones
Valued Contributor

Re: Reporting a zero balance.


@Anonymous wrote:

LOL! Thanks! Yeah, I use google to search on the forum! So I will see how it goes! I just have $140 on one card now! Thanks for the tip! Smiley Happy


Unless your about to apply for a CC/Auto Loan/Mortgage etc, I wouldn't worry too much.  When it's time then you optimize it.

Current Fico Scores: (December 2023)
Message 9 of 10
Anonymous
Not applicable

Re: Reporting a zero balance.

As someone else said, everyone is different, but this is what happened to me.  I have 5-6 credit cards and all expect for one reported a zero balance.  The other one had $18.00 on it.  I am going for a house, so I wanted every credit card to report a zero balance - thinking that would be a good thing.  Yesterday I got an alert - thinking my score was going to jump. 

 

It was two alerts (at the same time)  One alert said:  Your balance dropped 100% from $18.00 --> $0.00

 

The second alert said:  Your Experian score dropped 13 points.   713  -->  700

 

(What!!)

 

Again, everyone is different, but that is what happened to me.  After reading so many blogs, I think it is best to at least carry a balance (1% - 5%) on your cards. 

 

What I do not know is if I should have a balance on all credit cards or just one. 

 

The gist of credit is to show you are being responsible - having zero balances does not show being or not being responsible since the credit companies have nothing to go by.

 

It is not a perfect system, but stepping back and seeing their point of view of carrying a small balance, does make sense.

Message 10 of 10
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.