topic Re: PIF waht are the risks in Credit Cards

PIF waht are the risks

Anonymous — Wed, 10 Sep 2008 21:15:55 GMT

i wonder if paying your balance everytime and all the time in full can hurt my credit history since for the credit card companies i m not a good source of profit since i wont have to pay any fees or intrests.

what do you guys think, and please correct me if i m wrong

thanks!

Re: PIF waht are the risks

Anonymous — Wed, 10 Sep 2008 21:33:33 GMT

Don't pay all cards PIF. Zero cards with balance will reduce your score.

Re: PIF waht are the risks

score_building — Thu, 11 Sep 2008 14:44:16 GMT

the credit card companies are separate from the credit reporting agencies. you are right, if you pif the ccc's do not earn interest on your purchases (and that is clearly a good thing for you) and may even call you a 'dead beat' behind your back... this is a nick name for people who pif in the upside down world of ccc's because they are not making as much money on your account, hence you are a dead beat to them... they still are making money off every single transaction you initiate in the form of transaction fees however.

By paying in full you will generally have the best shot at maintaining your highest score.

Message Edited by score_building on 09-11-2008 07:44 AM

Re: PIF waht are the risks

Anonymous — Wed, 10 Sep 2008 23:02:16 GMT

NEVER EVER leave a balance on the card past the due date. There is absolutely NO REASON to pay a single penny of interest. Always PIF every month and if you're worried about a zero balance lowering your score, just make sure you have at least a small purchase on each card, then PIF after the statement cuts.

Re: PIF waht are the risks

Anonymous — Wed, 10 Sep 2008 23:40:38 GMT

Yes, PIF will nevertheless result in reported balances, which is what you want. Of the two reports that I have seen, the Experian one is very thorough: It contains CL, high balance, recent balance and recent payment. The last two numbers give away that I usually pay in full.

Re: PIF waht are the risks

haulingthescoreup — Thu, 11 Sep 2008 02:59:01 GMT

@Anonymous wrote:
Yes, PIF will nevertheless result in reported balances, which is what you want. Of the two reports that I have seen, the Experian one is very thorough: It contains CL, high balance, recent balance and recent payment. The last two numbers give away that I usually pay in full.

No, you really don't want to have balances reported on more than a few cards. If they do, you will be penalized for high utilization of your credit (util), which is about 1/3 of your score.

Even if you pay before the statement drops, and the CCC reports a $0 balance, they also report what your total charges (if any) were during the month. I just got a score alert about activity on my B&N MC, which I had sock-drawered for three months. They reported the $0 balance, and they also reported the total charges during the month, which then replaced my previous high balance.

For once, I didn't get a score drop. Here's what the alert looked like:

September 9, 2008
View details of other recent alerts:

Alert: An account that has been inactive for more than 3 months has become recently active

Score Watch alert/Changes to your FICO® Score
Your FICO® score is 709 and has not changed since August 26, 2008.

Changes to your credit report

1 of your previously dormant accounts reported recent activity
BARCLAYS BANK DELAWARE (XXXXXXXXXXXXXXXX)
Recent activity detected: 9/1/2008
Show/Hide Details

Account opened: 3/2008
Description: Credit card
Amount in H/C column is credit limit

Previously reported Newly reported
Date of last activity: 5/1/2008 9/1/2008

You received this alert because there is new activity on this account that was inactive for more than 4 months.
You can change the settings for this kind of alert here.

Contact: BARCLAYS BANK DELAWARE, 125 S West St, Att: Credit Bureau, Wilmington, DE, 198015014 • (302) 888-1400
Why did I get this alert?

This alert was sent because there is new activity on an account that was inactive for more than 4 months.

How newly active accounts impact your score:

You received this alert because one of your credit accounts is showing activity after having been inactive for some time. The effect this has on your FICO® score is hard to predict; it may cause your score to go up or go down.

This kind of alert often happens at the same time as other alerts on the same account. The other alert, perhaps a balance increase alert or an account change alert, likely has a greater effect on your FICO® score. However, it is possible for new activity on an inactive account, by itself, to affect your FICO® score.

Your FICO® score may go up if most of the accounts listed in your credit report have been inactive recently and then new activity is reported on one of the accounts. Consumers who have recently used credit responsibly often have higher FICO® scores than consumers who have not used credit at all recently. Therefore, showing new account activity on your credit report that previously had little recent activity can help your FICO® score.

Your FICO® score may go down if the new activity is reported on an account that was already in bad status. Accounts in bad status include those that are currently past due, have a history of missed payments, or are charged-off or sold to a collection agency.

edit to add: thanks for the catch, sidewinder!

Memo to all: probably no one could use the partial account number that I posted, but there's really no reason to have it displaying. Be sure that if you copy/paste, you XXX the whole thing out. If you do a screenshot, use your Paint eraser to blank out the number, and any other personally identifiable info.

Message Edited by haulingthescoreup on 09-10-2008 07:59 PM

Re: PIF waht are the risks

Anonymous — Thu, 11 Sep 2008 04:07:06 GMT

@haulingthescoreup wrote:
@Anonymous wrote:
Yes, PIF will nevertheless result in reported balances, which is what you want. Of the two reports that I have seen, the Experian one is very thorough: It contains CL, high balance, recent balance and recent payment. The last two numbers give away that I usually pay in full.

No, you really don't want to have balances reported on more than a few cards. If they do, you will be penalized for high utilization of your credit (util), which is about 1/3 of your score.

Even if you pay before the statement drops, and the CCC reports a $0 balance, they also report what your total charges (if any) were during the month.

I'm not sure how your example contradicts what I said. As long as your total of usage stays below 10% of your total CL, you should be mostly fine. Your quote even says that your score might go up if you use the card after inactivity, unless it was a bad account.

Re: PIF waht are the risks

haulingthescoreup — Thu, 11 Sep 2008 04:15:40 GMT

I thought you were talking about letting accounts report balances in general.

You are scored on reported balances divided by credit limits, and also on the number of accounts with balances. So it is very much to your advantage to have only 2 cards reporting balances, both for util and for number of balances.

If you PIF, but wait until the statement posts to do so, it makes it look like you're carrying balances, even when you're not.

The occasional ding for activity on a dormant account is a one-time thing and goes away the next month.

Re: PIF waht are the risks

Anonymous — Thu, 11 Sep 2008 04:45:14 GMT

@haulingthescoreup wrote:
I thought you were talking about letting accounts report balances in general.

I guess we are on the same side here. I think if I had to juggle balances on 7 accounts, I would go crazy .

Re: PIF waht are the risks

Anonymous — Thu, 11 Sep 2008 12:31:47 GMT

Quick question...

I keep 3 cards in my wallet and use them at least once per month. When I pull my credit cards out of my sock drawer once every few months and make a small purchase to keep them active, if I make 5 purchases on 5 of my sock drawer cards in a short period of time and pay in-full, will it negatively influence my score?

To be more specific, I am not talking about negative influence as a result of a high balance here, because I usually keep my total utilization around 2% or 3%. My question is as to whether or not the number of cards I have balances on will impact my score.

Re: PIF waht are the risks

haulingthescoreup — Thu, 11 Sep 2008 21:39:58 GMT

@Anonymous wrote:

Quick question...

I keep 3 cards in my wallet and use them at least once per month. When I pull my credit cards out of my sock drawer once every few months and make a small purchase to keep them active, if I make 5 purchases on 5 of my sock drawer cards in a short period of time and pay in-full, will it negatively influence my score?

To be more specific, I am not talking about negative influence as a result of a high balance here, because I usually keep my total utilization around 2% or 3%. My question is as to whether or not the number of cards I have balances on will impact my score.
Yes, there is a separate penalty for "too many accounts with balances."

For most people, it's half of fewer of ALL accounts, and fewer than half (note the difference) of your CC's. So if you have a mortgage, a car loan, and six CC's, that's 8 accounts. Half of 8 is 5 4, so four total can report. Your mortgage and car loan will always report a balance until they're closed, so that means 2 CC's can report. Do a cross-check on the CC count: half of 6 is three; fewer than half is 2, so you're also "allowed" 2 to report as well. Which ever formula comes up with the lower number is the one to follow.

Higher score buckets might want even fewer reporting, and sometimes they want none at all. (Just when you figure out the rules, they change. ) But the above formulas will work for most people.

Again, using the cards during the billing period and paying them before they report doesn't affect this at all. It's just how many actually report to your CRA's, which generally means how many have a dollar figure on the statement, even if you paid them the next day.

edit: so handy to have all these editors! thanks, UpUpUp

Message Edited by haulingthescoreup on 09-11-2008 02:39 PM

Re: PIF waht are the risks

ficonovice — Thu, 11 Sep 2008 19:57:14 GMT

I have definitely seen an impact when I let a few more cards report balances (even small balances).

I have a total of 12 open accounts (all accounts, including car, installment, mortgage and credit cards).

When I let more than 2 credit cards report a (small) balance, I have seen a reduction in my score of 5-13 points.

I still obsess over my scores, but have realized that we are all a little crazy over relatively minor fluctuations in our scores. I'm trying to relax and realize that as long as I pay on time, every time my FICO scores will be just fine....

Re: PIF waht are the risks

Anonymous — Thu, 11 Sep 2008 20:32:09 GMT

Hey Hauling, where did you go to school?

haulingthescoreup wrote:

Half of 8 is 5, so four total can report. Your mortgage and car loan will always report a balance until they're closed, so that means 2 CC's can report. Do a cross-check on the CC count: half of 6 is three; fewer than half is 2, so you're also "allowed" 2 to report as well. Which ever formula comes up with the lower number is the one to follow.

Re: PIF waht are the risks

haulingthescoreup — Thu, 11 Sep 2008 21:37:40 GMT

@Anonymous wrote:
@haulingthescoreup wrote:

Half of 8 is 5, so four total can report. Your mortgage and car loan will always report a balance until they're closed, so that means 2 CC's can report. Do a cross-check on the CC count: half of 6 is three; fewer than half is 2, so you're also "allowed" 2 to report as well. Which ever formula comes up with the lower number is the one to follow.

Hey Hauling, where did you go to school?

Oh, dear. I started out using 10 accounts as an example. Thought I'd caught them all. Tres embarrassant!

And it was a prep school in Hawaii. Hope they don't strike me off the alumni mailing list. No wait, that might be useful; one less set of begging in the mail...

Re: PIF waht are the risks

Anonymous — Thu, 11 Sep 2008 21:51:31 GMT

Hehe. I'm just playing with ya.

It wouldn't be so bad if they took you of the mailing list though!

Re: PIF waht are the risks

haulingthescoreup — Thu, 11 Sep 2008 22:01:37 GMT

@Anonymous wrote:

Hehe. I'm just playing with ya.
It wouldn't be so bad if they took you of the mailing list though!

I think that the most depressing alumni bulletin I got was the one that mentioned that a classmate had married the former husband of Princess Anne and was now doing something or other with the British Olympic equestrian team. That's when you know that you're under-performing.

Re: PIF waht are the risks

Anonymous — Thu, 11 Sep 2008 22:15:18 GMT

Woah! Yeah, that's quite a blow to the ego.

Well here's to hoping she is is secretly miserable and her husband has bad breath. *Cheers*

haulingthescoreup wrote:

I think that the most depressing alumni bulletin I got was the one that mentioned that a classmate had married the former husband of Princess Anne and was now doing something or other with the British Olympic equestrian team. That's when you know that you're under-performing.

Re: PIF waht are the risks

haulingthescoreup — Thu, 11 Sep 2008 22:32:03 GMT

There you go, horsey people all hanging out together. There's someone for everyone, it appears.