topic Re: Pay in Full vs. Paying after statement in Credit Cards

Pay in Full vs. Paying after statement

Anonymous — Mon, 01 Dec 2014 22:48:23 GMT

Hi All,

Thanks for your input on this question. I've read many conflicting opinions on which payment system is better for credit scoring (pay in full before statement vs. paying in full after the statement is cut). I was wondering if anyone could shed some light on this issue, or at least hash out the differences so I know which is best for me. Currently, I pay in full before the statement, so my statements always show 0 is owed.

Sorry for the newbie question. I appreciate the help.

Re: Pay in Full vs. Paying after statement

yfan — Mon, 01 Dec 2014 22:55:18 GMT

Assuming that you pay the balance in full before the due date, there is no difference between paying before the statement cuts and after except for the fact that once the statement cuts, the balance is reported on your credit reports and counts for utilization purposes. If you pay in full before the statement cuts, it simply show zero balance. It's up to you and your situation how many balances you want to show on your CRs, but usually around here people recommend zero balance reporting on all cards but one to optimize your score - which, I should mention, you should only be doing when you are about to apply for new credit.

Re: Pay in Full vs. Paying after statement

SunriseEarth — Mon, 01 Dec 2014 23:06:08 GMT

@Anonymous wrote:
Hi All,

Thanks for your input on this question. I've read many conflicting opinions on which payment system is better for credit scoring (pay in full before statement vs. paying in full after the statement is cut). I was wondering if anyone could shed some light on this issue, or at least hash out the differences so I know which is best for me. Currently, I pay in full before the statement, so my statements always show 0 is owed.

Sorry for the newbie question. I appreciate the help.

If you're doing this on all of your CCs, then it appears that you aren't using any of your credit and your score would be lower than letting a balance post on one card. Typically, we recommend letting a balance post on one card, so long as the balance is <10% of your CL. That can be paid off before the due date to avoid interest.

Re: Pay in Full vs. Paying after statement

marty56 — Mon, 01 Dec 2014 23:16:14 GMT

There was an old thread (I wish I could rememeber it) where the OP complained that his FICO socre was very low. He used them for his business to get the rewards but hey always reporeted as being close to maxed out even though he PIF'd each month. What you are talking about heere is the FICO Score reporting game. Some CCs repoprt the same day each month like clockwork, while others not so much. GEMB sometimes takes 2 reporting cycles to report a zero balance. It takes work but you can master this game and remember just being in a position to decide how much util is being reported on your CR is a blessing.

Re: Pay in Full vs. Paying after statement

MarineVietVet — Tue, 02 Dec 2014 18:28:01 GMT

@Anonymous wrote:
Hi All,

Thanks for your input on this question. I've read many conflicting opinions on which payment system is better for credit scoring (pay in full before statement vs. paying in full after the statement is cut). I was wondering if anyone could shed some light on this issue, or at least hash out the differences so I know which is best for me. Currently, I pay in full before the statement, so my statements always show 0 is owed.

Sorry for the newbie question. I appreciate the help.

Hello and welcome to the FICO forums.

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.

Re: Pay in Full vs. Paying after statement

s_haliz — Tue, 02 Dec 2014 19:04:17 GMT

@MarineVietVet wrote:
@Anonymous wrote:
Hi All,

Thanks for your input on this question. I've read many conflicting opinions on which payment system is better for credit scoring (pay in full before statement vs. paying in full after the statement is cut). I was wondering if anyone could shed some light on this issue, or at least hash out the differences so I know which is best for me. Currently, I pay in full before the statement, so my statements always show 0 is owed.

Sorry for the newbie question. I appreciate the help.
Hello and welcome to the FICO forums.

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.

I guess you had already achieved the highest!!!

Re: Pay in Full vs. Paying after statement

vanillabean — Tue, 02 Dec 2014 19:05:16 GMT

It’s just like enjoying the hors d’oeuvres at a gathering. You aren’t really partying if you don’t take any, and you are also viewed as less than sociable if you hog the shrimp. The same goes for using credit. Use some, not nothing or not too much (applies to the statement date; scoring doesn't care about the due date). This will always be ideal, the same for everyone, the one size approach that fits all, lol.

Re: Pay in Full vs. Paying after statement

Anonymous — Tue, 02 Dec 2014 19:46:29 GMT

@Anonymous-own-fico wrote:
It’s just like enjoying the hors d’oeuvres at a gathering. You aren’t really partying if you don’t take any, and you are also viewed as less than sociable if you hog the shrimp. The same goes for using credit. Use some, not nothing or not too much (applies to the statement date; scoring doesn't care about the due date). This will always be ideal, the same for everyone, the one size approach that fits all, lol.

Love this outlook on it.

Re: Pay in Full vs. Paying after statement

Anonymous — Tue, 02 Dec 2014 23:09:44 GMT

Of course, doing this is cheating the system, just as much as say, oh, MS. The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts. So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers. I am shocked it is openly condoned.

Re: Pay in Full vs. Paying after statement

Anonymous — Tue, 02 Dec 2014 23:14:02 GMT

@Anonymous wrote:
Of course, doing this is cheating the system, just as much as say, oh, MS. The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts. So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers. I am shocked it is openly condoned.

ROFL. Hate the player, not the game.

Re: Pay in Full vs. Paying after statement

Anonymous — Tue, 02 Dec 2014 23:20:39 GMT

@LTL, lol. So true.

Re: Pay in Full vs. Paying after statement

Anonymous — Wed, 03 Dec 2014 00:52:38 GMT

@Anonymous wrote:
@LTL, lol. So true.

But I would be surprised if many of the quick-to-cast-stones crowd will give up "optimizing" their scores!

Re: Pay in Full vs. Paying after statement

Chris679 — Wed, 03 Dec 2014 01:21:09 GMT

@Anonymous wrote:
Of course, doing this is cheating the system, just as much as say, oh, MS. The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts. So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers. I am shocked it is openly condoned.

How would there be any risk if the balance is already paid? To make any argument that people who pay down before the statement are doing something wrong or misleading is ridiculous.

Re: Pay in Full vs. Paying after statement

Anonymous — Wed, 03 Dec 2014 01:38:05 GMT

@Chris679 wrote:
@Anonymous wrote:
Of course, doing this is cheating the system, just as much as say, oh, MS. The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts. So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers. I am shocked it is openly condoned.
How would there be any risk if the balance is already paid? To make any argument that people who pay down before the statement are doing something wrong or misleading is ridiculous.

Or actually correct. The FICO algorithms are based on data collected over time and comparing those that at some point defaulted from those that didn't. It doesn't need to make sense, just statistical correlation. So more points are given to those that have say one non-zero balance. Because the data is based on "normal" behavior, this is going to happen when people are using only one cc, or perhaps rotating which cc they use from time to time. Here, people can be spending abritrary amounts on all thier cards, and just paying htem down to 0 before the statement cuts.

We are not talking about risk THIS cycle, because as you say the money is paid. But when you apply for a new card (precisely the time people are told to do this trick) you are giving the creditor the impression that you are one of these low-risk type of people, when in fact your real behavior doesn't match that all.

Whichever way you view it, this is gaming the algorithm. Or being deliberately deceptive to gain an advantage. Which is OK by me, but people should understand what they are really doing, and is as "wrong" as most other things that are called wrong here.

Re: Pay in Full vs. Paying after statement

elim — Wed, 03 Dec 2014 01:48:41 GMT

i would really love to share my 2 cents here but i have to run to CVS and get some more ice cream.

Re: Pay in Full vs. Paying after statement

Anonymous — Wed, 03 Dec 2014 01:52:41 GMT

@elim wrote:
i would really love to share my 2 cents here but i have to run to CVS and get some more ice cream.

Nooooo! Get Amex gift cards, no purchase fee through Dec 6.

Re: Pay in Full vs. Paying after statement

Anonymous — Wed, 03 Dec 2014 02:00:23 GMT

Really? I don't MS but I want to get a $20 one for niece.

Re: Pay in Full vs. Paying after statement

yfan — Wed, 03 Dec 2014 02:09:59 GMT

@Anonymous wrote:
Of course, doing this is cheating the system, just as much as say, oh, MS. The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts. So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers. I am shocked it is openly condoned.

Yeah, it's exactly the same, except, you know, that no one agrees to a terms of service with Credit Reporting Bureaus promising not to pay their credit cards before the statement cuts, whereas by using credit cards we agree to terms that prohibit behavior that is commonly described as MS. The two are also exactly the same except that one is knowing the rules of the game and using them to your advantage and the other is gaming the system. So yes, other than the difference between an athlete who strategizes for a game within the rules and another athelete and who simply skirts the rules (say, by certain using certain prohibited enhancements) or that between a student who used test taking techniques to get a better test score and one who just cheats -- other than those, yeah, there is absolutely no difference between the two.

Re: Pay in Full vs. Paying after statement

Anonymous — Wed, 03 Dec 2014 02:13:33 GMT

@elim, Rocky road?

Re: Pay in Full vs. Paying after statement

Chris679 — Wed, 03 Dec 2014 02:46:05 GMT

I don't think it's far fetched to imagine FICO analyzing the "PIF before statement" behavior years ago and determining that it is not an indicator of risk and therefore not factoring it into scoring models. I think any artificial score boast you see from this is probably deserved based on the fact that this very responsible behavior. Over the top and unnecessary maybe but certainly responsible.