topic Re: High balance affect score? in Credit Cards

High balance affect score?

Michael982 — Wed, 26 Nov 2014 02:31:08 GMT

Does your high balance on your credit report affect you in any way. I have several cards and they all show low balances. Like my amex has a 16k limit but the highest balance is $99. I put maybe 4k through this card a month, I just end up paying it off bi-weekly so it never posts. Should I let some of the high balances post to make the history look better?

Re: High balance affect score?

Burned2manybridgesB4 — Wed, 26 Nov 2014 02:40:48 GMT

@Michael982 wrote:
Does your high balance on your credit report affect you in any way. I have several cards and they all show low balances. Like my amex has a 16k limit but the highest balance is $99. I put maybe 4k through this card a month, I just end up paying it off bi-weekly so it never posts. Should I let some of the high balances post to make the history look better?

Helps if you want all your creditors to see it, and that one specific TL doesn't report your monthly payments at a zero bal report.

Re: High balance affect score?

Chris679 — Wed, 26 Nov 2014 02:41:23 GMT

Has no affect. I'm sure someone will pipe in and say that there is a tiny remote chance that under manual review a CA might interpret it one way or another but don't worry about it.

Re: High balance affect score?

Burned2manybridgesB4 — Wed, 26 Nov 2014 02:42:47 GMT

Here's an example of what I'm referring to.

Jun 2014: $3 / no data / Unknown / no data
May 2014: $16 / no data / Unknown / no data
Apr 2014: $0 / no data / Unknown / no data
Mar 2014: $0 / no data / Unknown / no data
Feb 2014: $0 / no data / Unknown / no data
Jan 2014: $0 / no data / Unknown / no data
Dec 2013: $0 / no data / Unknown / no data
Nov 2013: $0 / no data / Unknown / no data
Oct 2013: $25 / no data / Unknown / no data
Sep 2013: $0 / no data / Unknown / no data
Aug 2013: $0 / no data / Unknown / no data
Jul 2013: $0 / no data / Unknown / no data
Jun 2013: $0 / no data / Unknown / no data
May 2013: $103 / no data / Unknown / no data
Apr 2013: $55 / no data / Unknown / no data
Mar 2013: $58 / no data / Unknown / no data
Feb 2013: $75 / no data / Unknown / no data
Jan 2013: $138 / no data / Unknown / no data
Dec 2012: $100 / no data / Unknown / no data
Nov 2012: $29 / no data / Unknown / no data
Oct 2012: $402 / no data / Unknown / no data

Re: High balance affect score?

NRB525 — Wed, 26 Nov 2014 03:40:05 GMT

What are the three columns to the right?

There are two ways you will generally see your CR of history:

1) What you see there: You are PIF each month, and there is zero balance rolling forward. THEREFORE, you have NO "Agreed Minimum Payment" which would be one of the columns. Another column would be the actual amount you paid that month. The amount you paid must be more than the "Agreed Minimum Payment" column otherwise you short paid. The third column (No Data here) would be the count whether you paid late or not.

2) You DO carry a balance or carry over a balance from one month to a few following. In that case, you will have a "Agreed Minimum Payment" for the month, based on the Ts&Cs agreement, the "Actual Payment" amount, and a flag/score for whether you paid on time or were late 30, 60, 90 (god forbid).

The account should still register as "Paid as agreed" but the individual payments aren't able to calculate anything.

Are those the column headers / description of the three columns?

Re: High balance affect score?

Burned2manybridgesB4 — Wed, 26 Nov 2014 03:44:50 GMT

account balance / date payment received / scheduled payment amount / actual amount paid

In my listed example for the OP, I was showing them the notion of letting a balance report, not carry. The other OC's can then see usage, and high limit, but whereas the problem can arise with listings like my example...

Re: High balance affect score?

NRB525 — Wed, 26 Nov 2014 03:54:00 GMT

@Burned2manybridgesB4 wrote:
account balance / date payment received / scheduled payment amount / actual amount paid

In my listed example for the OP, I was showing them the notion of letting a balance report, not carry. The other OC's can then see usage, and high limit, but whereas the problem can arise with listings like my example...

Agreed, the CCC reporting the lack of amounts should just show zeros, I guess it depends on the format of the CR.

To reiterate, in the "no data" situation, the card still reports as OK.

If there was a late in there, you can bet it would show "data"

Re: High balance affect score?

Burned2manybridgesB4 — Wed, 26 Nov 2014 03:57:18 GMT

@NRB525 wrote:
@Burned2manybridgesB4 wrote:
account balance / date payment received / scheduled payment amount / actual amount paid

In my listed example for the OP, I was showing them the notion of letting a balance report, not carry. The other OC's can then see usage, and high limit, but whereas the problem can arise with listings like my example...

Agreed, the CCC reporting the lack of amounts should just show zeros, I guess it depends on the format of the CR.
To reiterate, in the "no data" situation, the card still reports as OK.

If there was a late in there, you can bet it would show "data"

Right, but underwriters look for more than a little green OK.

Re: High balance affect score?

Chris679 — Wed, 26 Nov 2014 12:25:51 GMT

@Burned2manybridgesB4 wrote:
@NRB525 wrote:
@Burned2manybridgesB4 wrote:
account balance / date payment received / scheduled payment amount / actual amount paid

In my listed example for the OP, I was showing them the notion of letting a balance report, not carry. The other OC's can then see usage, and high limit, but whereas the problem can arise with listings like my example...

Agreed, the CCC reporting the lack of amounts should just show zeros, I guess it depends on the format of the CR.
To reiterate, in the "no data" situation, the card still reports as OK.

If there was a late in there, you can bet it would show "data"
Right, but underwriters look for more than a little green OK.

What information is this statement based on? Isn't it more logical to think that a creditor is simply concerned with your current obligation/ balance and your past payment history? I would think that if this payment history was important to underwriters then FICO would start including it in scoring models to better serve their customers. My advice is to worry about what affects your FICO score and not to waste time worrying about things that don't because I highly doubt anyone else is either.

Re: High balance affect score?

takeshi74 — Wed, 26 Nov 2014 13:53:13 GMT

@Chris679 wrote:
Isn't it more logical to think that a creditor is simply concerned with your current obligation/ balance and your past payment history? I would think that if this payment history was important to underwriters then FICO would start including it in scoring models to better serve their customers.

I don't think it's logical to assume that all creditors have identical criteria. It's never just about score and that's why reports are pulled in addition to scores.

Re: High balance affect score?

NRB525 — Wed, 26 Nov 2014 14:16:49 GMT

@takeshi74 wrote:
@Chris679 wrote:
Isn't it more logical to think that a creditor is simply concerned with your current obligation/ balance and your past payment history? I would think that if this payment history was important to underwriters then FICO would start including it in scoring models to better serve their customers.
I don't think it's logical to assume that all creditors have identical criteria. It's never just about score and that's why reports are pulled in addition to scores.

I think that is the concern. In the examples earlier, where NOTHING was allowed to carry over, and in the "No Data" sequence, the cardholder has not borrowed anything. In certain situations where an UW is tasked with looking in more detail at the CR, they don't see that any borrowing occurred.

Given enough time, the "no data" model will improve the FICO score, but while that time is passing the cardholder is not borrowing other funds, not building relationships with banks for regular lending, not really showing that they know how to borrow a substantial sum and pay it back according to a payment agreement. It's about building trust, the foundation of all lending, and putting that on display in the credit report.

Re: High balance affect score?

Chris679 — Wed, 26 Nov 2014 20:30:09 GMT

@NRB525 wrote:
@takeshi74 wrote:
@Chris679 wrote:
Isn't it more logical to think that a creditor is simply concerned with your current obligation/ balance and your past payment history? I would think that if this payment history was important to underwriters then FICO would start including it in scoring models to better serve their customers.
I don't think it's logical to assume that all creditors have identical criteria. It's never just about score and that's why reports are pulled in addition to scores.
I think that is the concern. In the examples earlier, where NOTHING was allowed to carry over, and in the "No Data" sequence, the cardholder has not borrowed anything. In certain situations where an UW is tasked with looking in more detail at the CR, they don't see that any borrowing occurred.

Given enough time, the "no data" model will improve the FICO score, but while that time is passing the cardholder is not borrowing other funds, not building relationships with banks for regular lending, not really showing that they know how to borrow a substantial sum and pay it back according to a payment agreement. It's about building trust, the foundation of all lending, and putting that on display in the credit report.

I know what you are saying here I just don't think this is something to worry about in addition to the factors that we actually know affect approvals. For example in 2010 the first time I applied for Citi Forward I was denied based on "lack of use of revolving credit". This is a well known reason for denial and it did not make any difference to them that I had just paid off thousands of dollars in balances with a profit sharing bonus and waited for them to report zero balance because I didn't know any better. I sent them letters with copies of previous reports showing these balances and highlighting the very things that you are talking about and it did not matter, still denied. They could see these high balance and previous payment numbers on my reports and they made no difference. You know what did matter? Letting a tiny balance report the next month resulted in an approval for $8000.

For folks that are not experienced with credit scoring models they can be very confusing and I think it is best to advise them to simply worry about the things that we actually know affect FICO and approvals.

Re: High balance affect score?

NRB525 — Thu, 27 Nov 2014 04:36:18 GMT

@Chris679 wrote:
@NRB525 wrote:
@takeshi74 wrote:
@Chris679 wrote:
Isn't it more logical to think that a creditor is simply concerned with your current obligation/ balance and your past payment history? I would think that if this payment history was important to underwriters then FICO would start including it in scoring models to better serve their customers.
I don't think it's logical to assume that all creditors have identical criteria. It's never just about score and that's why reports are pulled in addition to scores.
I think that is the concern. In the examples earlier, where NOTHING was allowed to carry over, and in the "No Data" sequence, the cardholder has not borrowed anything. In certain situations where an UW is tasked with looking in more detail at the CR, they don't see that any borrowing occurred.

Given enough time, the "no data" model will improve the FICO score, but while that time is passing the cardholder is not borrowing other funds, not building relationships with banks for regular lending, not really showing that they know how to borrow a substantial sum and pay it back according to a payment agreement. It's about building trust, the foundation of all lending, and putting that on display in the credit report.
I know what you are saying here I just don't think this is something to worry about in addition to the factors that we actually know affect approvals. For example in 2010 the first time I applied for Citi Forward I was denied based on "lack of use of revolving credit". This is a well known reason for denial and it did not make any difference to them that I had just paid off thousands of dollars in balances with a profit sharing bonus and waited for them to report zero balance because I didn't know any better. I sent them letters with copies of previous reports showing these balances and highlighting the very things that you are talking about and it did not matter, still denied. They could see these high balance and previous payment numbers on my reports and they made no difference. You know what did matter? Letting a tiny balance report the next month resulted in an approval for $8000.

For folks that are not experienced with credit scoring models they can be very confusing and I think it is best to advise them to simply worry about the things that we actually know affect FICO and approvals.

To speculate on your Citi situation, Chris, it is possible that their internal scoring was looking for current balances, presuming that regular users of revolving credit would have balances reporting. Given the volume of CC apps they look at, it is unlikely this UW group would want to go back through history in a manual review. I'm going to use this as a reason I let all my cards report balances

And I agree; the debate about nothing reporting, one reporting, or everything reporting is not going to make a real difference in the score. Paying on time and keeping utilization low but above zero, and doing that for many months/years is what gets the FICO score improving.