Valued Member
VikingsLoyalFan
Posts: 42
Registered: ‎01-08-2013
To Pay or Not to Pay, that is the Question..

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  

Valued Contributor
daybreakgonesXe
Posts: 1,843
Registered: ‎11-17-2012
Re: To Pay or Not to Pay, that is the Question..

VikingsLoyalFan wrote:

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  


That depends what you want to do! If you have multiple cards, many people like to pay off the accounts to 0 while leaving one account with a 1-9% utilization amount over their total credit lines, in order to really maximize their scores.

 

If you're not planning on apping for anything anytime soon, this really isn't necessary. Feel free to have a small balances on whatever you want!

Capital One Quicksilver World Mastercard $10k | JCPenney Platinum $7.5k | Shell Drive for Five $800 | Chase Freedom Visa Signature $9.8k | TD Bank Easy Rewards Visa Signature $5k | Chase Sapphire Visa Signature $10k | American Express Blue Sky $25k | Discover IT $9.5k | SavingStar American Express $14.8k

EQ FICO 735 TU FICO 747 Credit Karma (TU) 789 Transrisk 846/990 Credit Sesame (EX) 768 Credit.com (EX) 768 VantageScore 3.0 745
Valued Member
VikingsLoyalFan
Posts: 42
Registered: ‎01-08-2013
Re: To Pay or Not to Pay, that is the Question..

I am buying a house in a few months. Will a balance of 0 stop reoccuring reports to my credit?

Valued Contributor
bs6054
Posts: 1,673
Registered: ‎11-11-2012
Re: To Pay or Not to Pay, that is the Question..

daybreakgonesXe wrote:

VikingsLoyalFan wrote:

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  


That depends what you want to do! If you have multiple cards, many people like to pay off the accounts to 0 while leaving one account with a 1-9% utilization amount over their total credit lines, in order to really maximize their scores.

 

If you're not planning on apping for anything anytime soon, this really isn't necessary. Feel free to have a small balances on whatever you want!


I think we need to be completely clear here though!   There are two concepts:

 

1) Having a balance on your card at the time the statement is produced

2) Carrying a balance, i.e. not paying in full the statement balance by the payment due date.

 

All FICO score discussions are about 1).   People, for whatever reason, who want to maximize score, with pay in full BEFORE the statement CLOSES, on all but 1 of their cards.  So these statements then show 0 balance and that is what is reported to the CRAs.  (Some banks, like US Bank, report at month-end rather than at statement date, so you pay then before the end of the month, but the idea is the same)

 

Carrying a balance usually incurs interest charges and does nothing for your score, so whenever possible (and of course there are times that this might not be possible) don't do this.  If you are in a 0% interest period, then it's OK, but the complete balance will be reported to the CRA.

Valued Contributor
daybreakgonesXe
Posts: 1,843
Registered: ‎11-17-2012
Re: To Pay or Not to Pay, that is the Question..

VikingsLoyalFan wrote:

I am buying a house in a few months. Will a balance of 0 stop reoccuring reports to my credit?


You will not have this issue for MOST creditors. Since you do have a few months, try it out for a month and watch your reports closely. Most creditors will still report perfect payment while also reporting a $0 balance for the month!

Capital One Quicksilver World Mastercard $10k | JCPenney Platinum $7.5k | Shell Drive for Five $800 | Chase Freedom Visa Signature $9.8k | TD Bank Easy Rewards Visa Signature $5k | Chase Sapphire Visa Signature $10k | American Express Blue Sky $25k | Discover IT $9.5k | SavingStar American Express $14.8k

EQ FICO 735 TU FICO 747 Credit Karma (TU) 789 Transrisk 846/990 Credit Sesame (EX) 768 Credit.com (EX) 768 VantageScore 3.0 745
Valued Member
VikingsLoyalFan
Posts: 42
Registered: ‎01-08-2013
Re: To Pay or Not to Pay, that is the Question..

I am just nervous, my credit history is fairly new (as I have been rebuilding) 10/11 months of 100% on time payments. I have a Wal-Mart card (800 limit) which is 0 balance because I just got it. My First Premier is (300 limit) and the balance is 12 dollars. 

Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
Re: To Pay or Not to Pay, that is the Question..

daybreakgonesXe wrote:

VikingsLoyalFan wrote:

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  


That depends what you want to do! If you have multiple cards, many people like to pay off the accounts to 0 while leaving one account with a 1-9% utilization amount over their total credit lines, in order to really maximize their scores.

 

If you're not planning on apping for anything anytime soon, this really isn't necessary. Feel free to have a small balances on whatever you want!



This is slightly incorrect.  The general rule of thumb for optimal scoring is to have only one card report a balance with that balance being 9% or less of that card's individual credit limit.  This makes sense if you think about it.  If you have $50K in total available credit, 9% would be $4500.  You don't want to let a $4500 balance report on a card with a $5K CL. 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


Take the FICO Fitness Challenge
Valued Contributor
daybreakgonesXe
Posts: 1,843
Registered: ‎11-17-2012
Re: To Pay or Not to Pay, that is the Question..

Walt_K wrote:

daybreakgonesXe wrote:

VikingsLoyalFan wrote:

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  


That depends what you want to do! If you have multiple cards, many people like to pay off the accounts to 0 while leaving one account with a 1-9% utilization amount over their total credit lines, in order to really maximize their scores.

 

If you're not planning on apping for anything anytime soon, this really isn't necessary. Feel free to have a small balances on whatever you want!



This is slightly incorrect.  The general rule of thumb for optimal scoring is to have only one card report a balance with that balance being 9% or less of that card's individual credit limit.  This makes sense if you think about it.  If you have $50K in total available credit, 9% would be $4500.  You don't want to let a $4500 balance report on a card with a $5K CL. 


That's true, but usually that's a common sense thing. FICO scoring wise, as long the one account isn't maxed out, they're not gonna notice.But, then again, that doesn't mean though your creditor won't notice either!

 

But say for example I used my Shell card for utilization and the rest at zero to calculate 1% utility. When utilization is calcuated for a FICO purpose, it's over your total open revolving accounts. If i did 1% on my Shell, that's $8. Then, over my total accounts: $8/$29400 = 2.72108843537415e-4 = .027%!!!

 

Now, not sure how the FICO scoring model will weigh that. Will they round it to 0%? 1%? Would I be losing points this way now?

 

So take caution to the wind when playing around with utility!

Capital One Quicksilver World Mastercard $10k | JCPenney Platinum $7.5k | Shell Drive for Five $800 | Chase Freedom Visa Signature $9.8k | TD Bank Easy Rewards Visa Signature $5k | Chase Sapphire Visa Signature $10k | American Express Blue Sky $25k | Discover IT $9.5k | SavingStar American Express $14.8k

EQ FICO 735 TU FICO 747 Credit Karma (TU) 789 Transrisk 846/990 Credit Sesame (EX) 768 Credit.com (EX) 768 VantageScore 3.0 745
Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
Re: To Pay or Not to Pay, that is the Question..

daybreakgonesXe wrote:

Walt_K wrote:

daybreakgonesXe wrote:

VikingsLoyalFan wrote:

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  


That depends what you want to do! If you have multiple cards, many people like to pay off the accounts to 0 while leaving one account with a 1-9% utilization amount over their total credit lines, in order to really maximize their scores.

 

If you're not planning on apping for anything anytime soon, this really isn't necessary. Feel free to have a small balances on whatever you want!



This is slightly incorrect.  The general rule of thumb for optimal scoring is to have only one card report a balance with that balance being 9% or less of that card's individual credit limit.  This makes sense if you think about it.  If you have $50K in total available credit, 9% would be $4500.  You don't want to let a $4500 balance report on a card with a $5K CL. 


That's true, but usually that's a common sense thing. FICO scoring wise, as long the one account isn't maxed out, they're not gonna notice.But, then again, that doesn't mean though your creditor won't notice either!

 

But say for example I used my Shell card for utilization and the rest at zero to calculate 1% utility. When utilization is calcuated for a FICO purpose, it's over your total open revolving accounts. If i did 1% on my Shell, that's $8. Then, over my total accounts: $8/$29400 = 2.72108843537415e-4 = .027%!!!

 

Now, not sure how the FICO scoring model will weigh that. Will they round it to 0%? 1%? Would I be losing points this way now?

 

So take caution to the wind when playing around with utility!


It's worth pointing out for people that do not understand how this works.  While it's common sense to not max out a card, it's not so much common sense that you are getting dinged around 20-30% even.  If you're aiming for 9% total utilization it would be easy to end up around 20-30% individual utilization.  For the most part this won't matter, but there are people that need every last point, e.g., people trying to qualify for a mortgage. 

 

Utilization always rounds up.  .000001% is 1%. 

 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


Take the FICO Fitness Challenge
Valued Contributor
daybreakgonesXe
Posts: 1,843
Registered: ‎11-17-2012
Re: To Pay or Not to Pay, that is the Question..

Walt_K wrote:

daybreakgonesXe wrote:

Walt_K wrote:

daybreakgonesXe wrote:

VikingsLoyalFan wrote:

Ok, so I imagine this question has been asked over a 1,000 times but I keep reading something different. Can someone please explain to me the difference of paying a cc completely to 0 or leaving 9% utilization on it? I have never let the balance go to 0 in fear of not having reoccurring account (OK) on my credit. Do I pay them completely off or leave them with a really low balance? Thanks in advance!  


That depends what you want to do! If you have multiple cards, many people like to pay off the accounts to 0 while leaving one account with a 1-9% utilization amount over their total credit lines, in order to really maximize their scores.

 

If you're not planning on apping for anything anytime soon, this really isn't necessary. Feel free to have a small balances on whatever you want!



This is slightly incorrect.  The general rule of thumb for optimal scoring is to have only one card report a balance with that balance being 9% or less of that card's individual credit limit.  This makes sense if you think about it.  If you have $50K in total available credit, 9% would be $4500.  You don't want to let a $4500 balance report on a card with a $5K CL. 


That's true, but usually that's a common sense thing. FICO scoring wise, as long the one account isn't maxed out, they're not gonna notice.But, then again, that doesn't mean though your creditor won't notice either!

 

But say for example I used my Shell card for utilization and the rest at zero to calculate 1% utility. When utilization is calcuated for a FICO purpose, it's over your total open revolving accounts. If i did 1% on my Shell, that's $8. Then, over my total accounts: $8/$29400 = 2.72108843537415e-4 = .027%!!!

 

Now, not sure how the FICO scoring model will weigh that. Will they round it to 0%? 1%? Would I be losing points this way now?

 

So take caution to the wind when playing around with utility!


It's worth pointing out for people that do not understand how this works.  While it's common sense to not max out a card, it's not so much common sense that you are getting dinged around 20-30% even.  If you're aiming for 9% total utilization it would be easy to end up around 20-30% individual utilization.  For the most part this won't matter, but there are people that need every last point, e.g., people trying to qualify for a mortgage. 

 

Utilization always rounds up.  .000001% is 1%. 

 


Good point...then for those who don't fully understand the FICO model, aiming for 1-9% on one card is a safer bet then having them try to figure out 1-9% over total lines, especially if they have many cards with low limits that could make it seem like they're maxed out on one card.

 

Also, thank you for clarifying the utilization round up!

Capital One Quicksilver World Mastercard $10k | JCPenney Platinum $7.5k | Shell Drive for Five $800 | Chase Freedom Visa Signature $9.8k | TD Bank Easy Rewards Visa Signature $5k | Chase Sapphire Visa Signature $10k | American Express Blue Sky $25k | Discover IT $9.5k | SavingStar American Express $14.8k

EQ FICO 735 TU FICO 747 Credit Karma (TU) 789 Transrisk 846/990 Credit Sesame (EX) 768 Credit.com (EX) 768 VantageScore 3.0 745