topic Re: Revolving & Installment Balances in Credit Cards

Revolving & Installment Balances

adamseve — Fri, 03 Oct 2008 03:45:39 GMT

Ok...I PIF every month on my credit cards, but I want to make sure I don't get a ding in the near future. So, here are my questions:

1. If I PIF on ALL revolving debt will I get a drop in my score because they show $0 balances?

2. If I PIF on ALL revolving debt, but still show installment loan balance will this cause a ding?

I want to keep my scores as high as possible so I need to make sure I'm doing the PIF correct and handling balances correctly relative to the type of account.

Thanks for the assistance.

Re: Revolving & Installment Balances

Anonymous — Fri, 03 Oct 2008 10:13:59 GMT

you should leave a small balance on one credit card. you might get dinged for 0 balance. I did.

Installments are treated different i think. As long as they are up to date I believe it is in your favor (at least with TU)

I'm sure you will get some more input from others.

Re: Revolving & Installment Balances

haulingthescoreup — Fri, 03 Oct 2008 10:39:12 GMT

casinoannie has it right.

The exception (you know there's always an exception, right?) might be those who are up in the very high 700's and the 800's, who can show all $0 for a while and get away with it. TU alone just dinged DH for all $0's for six months running, go figure.

Re: Revolving & Installment Balances

Anonymous — Fri, 03 Oct 2008 15:33:37 GMT

I thought it doesn't matter whether you PIF or not, your statement balance will be reported as such. On EQ, there is no way to distinguish between a revolving balance and PIF, unlike on EX.

I thought you will only get dinged on $0 balances if you PIF before the statement cuts, something you might consider with high balances.

Re: Revolving & Installment Balances

haulingthescoreup — Fri, 03 Oct 2008 16:14:34 GMT

Ulan wrote:

I thought it doesn't matter whether you PIF or not, your statement balance will be reported as such. On EQ, there is no way to distinguish between a revolving balance and PIF, unlike on EX.

I thought you will only get dinged on $0 balances if you PIF before the statement cuts, something you might consider with high balances.

Not sure what you're asking, but what almost all CCC's report is the balance due on the statement. If you PIF beforehand, the balance will be reported as $0. If you partially pay beforehand or wait until after the statement posts to pay anything at all, the balance reported will be whatever is on the statement.

All three reports "know" if the card has been used within the previous cycle period.

The only ding is if all the reported balances are zero. So we usually say (for those who want to play this particular game) to let one or two report a minimal balance, and then PIF them after the statement drops, so that you don't pay any interest. I really hate paying any form of interest, other than on my mortgage and car loan, which are pretty much necessary evils.

Re: Revolving & Installment Balances

Anonymous — Fri, 03 Oct 2008 19:59:45 GMT

@Anonymous wrote:
I thought it doesn't matter whether you PIF or not, your statement balance will be reported as such. On EQ, there is no way to distinguish between a revolving balance and PIF, unlike on EX.

I thought you will only get dinged on $0 balances if you PIF before the statement cuts, something you might consider with high balances.

Yep. If you hold off paying until the DUE DATE not earlier so it can still post the balance on your CR on at least 1 CC it should report a balance still. The trick to reporting a bal is PIF before or after it updates on your CR. For example. My statment for a CC closes on 20th of the month and reports to CRAs on the 25th shortly after. My due date is not until the 10th of the next month. As long as I PIF after the 25th it will report a bal. If I PIF before the 25th it reports a $0 bal.

Installments are there or not there. Can't really tweak them much. However for a general rule try to have as few accounts report a balance on your CR but not less than 1 revolving account reporting a small bal regardless of all else. Of course this only matters the day you need your credit score up. Otherwise it has no long term affect PIF or not PIF, $0 bal or not. What does matter is that you have activity on all accounts at least once every 6 months to prevent going dormant.

Message Edited by ilovepizza on 10-03-2008 03:59 PM

Re: Revolving & Installment Balances

jmbfl — Fri, 03 Oct 2008 20:25:10 GMT

To add a slight layer of complexity to this matter, if I recollect correcty, for optimal UTIL you will require:

1) 1% to 9% UTIL on your revolving credit, and

2) balances reporting on less that 50% of your revolving accounts, and

3) two revolving lines for every installment line + 1 more. (This is the tricky part - I am not quite sure I worded this correctly.)

Re: Revolving & Installment Balances

Anonymous — Fri, 03 Oct 2008 22:17:19 GMT

@haulingthescoreup wrote:
Not sure what you're asking, but what almost all CCC's report is the balance due on the statement. If you PIF beforehand, the balance will be reported as $0. If you partially pay beforehand or wait until after the statement posts to pay anything at all, the balance reported will be whatever is on the statement.

Well, neither the original post nor the answers specified when the PIF would take place. I just wanted to point out that PIF doesn't necessarily mean a reported balance of $0.

Re: Revolving & Installment Balances

haulingthescoreup — Fri, 03 Oct 2008 22:27:12 GMT

jmbfl wrote:

To add a slight layer of complexity to this matter, if I recollect correcty, for optimal UTIL you will require:

1) 1% to 9% UTIL on your revolving credit, and

2) balances reporting on less that 50% of your revolving accounts, and

3) two revolving lines for every installment line + 1 more. (This is the tricky part - I am not quite sure I worded this correctly.)

Close!

1 and 2 are correct, and when it comes to the 1% part, FICO rounds up. I once had $7 reporting on around $85K total CL, and it showed up as 1%, when it was actually less than 1% of 1%.

For #3, it's half or fewer of all open tradelines, meaning any credit account: mortgages, installment loans, revolving, etc. The twice-as-many-revolving accounts is a good way to approximate the ideal number of accounts.

The big difference between #2 and #3 is "half or fewer" versus "fewer than half", plus of course which accounts are being counted.

#2 is looking specifically at your revolving (= CC) tradelines, so fewer than half of 5 cards would be 2 cards; fewer than half of 6 cards would also be 2 cards.

#3 says half or fewer of all TL's. If you have a mortgage, a car loan, a HELOC, and 5 cards, that's 8 TL's; half is 4; your mortgage, car loan, and (presumably) HELOC will always have balances, so that means only 1 of the 5 cards can report with a ding, rather than the two from #2. (You always go with the tougher version.)

So it is true that if you have twice as many revolving lines as installment lines, the extra CC's cancel out the pesky installment accounts. But it doesn't always happen, so work it out in your head first. (It's related to whether the number of accounts are odd or even, snore.)

Not trying to belabor the point; it's just that there are a lot of people who miss the distinction between "fewer than half" and "half or fewer."

Nap time!

Re: Revolving & Installment Balances

haulingthescoreup — Fri, 03 Oct 2008 22:29:13 GMT

Ulan wrote:

@haulingthescoreup wrote:

Not sure what you're asking, but what almost all CCC's report is the balance due on the statement. If you PIF beforehand, the balance will be reported as $0. If you partially pay beforehand or wait until after the statement posts to pay anything at all, the balance reported will be whatever is on the statement.
Well, neither the original post nor the answers specified when the PIF would take place. I just wanted to point out that PIF doesn't necessarily mean a reported balance of $0.

Oh, OK, sorry. I just started meds for an asthma attack, so I am moving into the Prednisone Zone. Things are starting to wiggle away from me

Re: Revolving & Installment Balances

jmbfl — Fri, 03 Oct 2008 23:07:12 GMT

Ulan wrote:
Well, neither the original post nor the answers specified when the PIF would take place. I just wanted to point out that PIF doesn't necessarily mean a reported balance of $0.

I don't have any problem using my accounts, PIFing and getting them to report a zero balance. Just pay the minimum balance prior to the payment date and the balance in sufficient time for it to post before the statement drops. Since I pay everything thorugh the computer this works out to be a day or two before the statement date. Then stop using that card until the statement drops. This will work with 95% of CL's. I believe it is Orchard that is the exception and that some of the Orchard cards report at the end of the month rather than on the statement date.

Re: Revolving & Installment Balances

jmbfl — Fri, 03 Oct 2008 23:19:26 GMT

As far as installment loans and the UTIL calculation are concerned if you have two auto loans and a mortgage you are going to need a bunch of SD'ed, zeroed out CC's to offset their effect on your UTIL. If you have several installment loans (student loans, personal loans, mortgages, boat loans, auto loans, etc.) it is a good reason to have a bunch of CC's. This is the place where those store cards you are lukewarm about because of the APR's begin to pay off. They don't get closed down quickly when they are SD'ed!

Re: Revolving & Installment Balances

haulingthescoreup — Fri, 03 Oct 2008 23:41:28 GMT

Yes, that example I gave of the mortgage, auto loan, HELOC, and 5 CC's was me this past winter. I went nuts trying to keep only one card reporting. Between a J.Crew store card that refused to update a paid-off balance, and an AU card which is really DH's, I got dinged regularly by TU. The other two were OK with 2 reporting, but then they'd get me for three.

Thus my February app spree. Haven't had that message since! Of course, now I have the new accounts ding. But it will be gone in 4 months, and I'll have a much better credit profile.

Re: Revolving & Installment Balances

jmbfl — Sat, 04 Oct 2008 00:08:31 GMT

I think there is a good argument for adding one TL every six months. Right now I have to wait for a while until the BofA/PenFed/Discover acquisitions settle in. When Kohl's get's established down here that will be one I want for the discounts. Then there are those Citi pre-app's I just got. And that gasoline card I will never us because there is no cash back. Oh dear...

Message Edited by jmbfl on 10-03-2008 05:08 PM

Re: Revolving & Installment Balances

haulingthescoreup — Sat, 04 Oct 2008 00:42:54 GMT

Yes, I'm sitting on the loveseat with the laptop and the cat (and the Ultra), surrounded by fun things that came in the mail, none of which I will touch until January, at the very earliest. They're going to have to show me how they will work to shine up my credit profile, though.

Re: Revolving & Installment Balances

adamseve — Sat, 04 Oct 2008 03:16:03 GMT

@haulingthescoreup wrote:
@jmbfl wrote:
To add a slight layer of complexity to this matter, if I recollect correcty, for optimal UTIL you will require:

1) 1% to 9% UTIL on your revolving credit, and

2) balances reporting on less that 50% of your revolving accounts, and

3) two revolving lines for every installment line + 1 more. (This is the tricky part - I am not quite sure I worded this correctly.)

#3 says half or fewer of all TL's. If you have a mortgage, a car loan, a HELOC, and 5 cards, that's 8 TL's; half is 4; your mortgage, car loan, and (presumably) HELOC will always have balances, so that means only 1 of the 5 cards can report with a ding, rather than the two from #2. (You always go with the tougher version.)

So it is true that if you have twice as many revolving lines as installment lines, the extra CC's cancel out the pesky installment accounts. But it doesn't always happen, so work it out in your head first. (It's related to whether the number of accounts are odd or even, snore.)

Not trying to belabor the point; it's just that there are a lot of people who miss the distinction between "fewer than half" and "half or fewer."

Nap time!

Ok...let's see if I've got this right. This is just an example to clarify in my head:

1. One auto loan

2. 10 revolving accounts

This is 11 tradelines and since the auto loan is going to almost always have a balance only 5 (or less) of the 10 revolving accounts can show a balance. Correct?

Re: Revolving & Installment Balances

adamseve — Sat, 04 Oct 2008 03:21:41 GMT

One more thing: since department store cards are revolving accounts does it matter that I only let these show a small balance versus say Capital One?

Also, how does anyone make this work with Household Bank? My payment is due the 1st week of the month but they refuse to update with CRAs until the last of the month. But, if I decide to make a purchase that's sizable they'll immediately update. However, if I don't make a purchase they won't update.

Any ideas on this? I basically go buy a cup of coffee now and just don't use this card.

Re: Revolving & Installment Balances

Veee — Sat, 04 Oct 2008 03:33:54 GMT

@adamseve wrote:
Ok...let's see if I've got this right. This is just an example to clarify in my head:
1. One auto loan
2. 10 revolving accounts

This is 11 tradelines and since the auto loan is going to almost always have a balance only 5 (or less) of the 10 revolving accounts can show a balance. Correct?

Let see if I get this right ... You have 11 tradelines, half would be 5.5 so half or fewer would be 5 (or less) minus your auto loan leaves you with 4 that can show a balance that you would want to keep under 9% utli

Re: Revolving & Installment Balances

haulingthescoreup — Sat, 04 Oct 2008 12:00:15 GMT

Veee has it:

rule #2 (from the list above) says half or fewer of all accounts should have balances, so 5.5 of all accounts can have balances --> 5 accounts, one of which is the loan, so 4 CC's

rule #3 says fewer than half of all revolving accounts (= CC's) should have balances, so fewer than half of 10 is 4 or fewer

So four is the magic number!

Re: Revolving & Installment Balances

Anonymous — Sat, 04 Oct 2008 16:20:36 GMT

I have 11 credit cards (three of which will report a balance) and 2 auto loans. If I then do a balance transfer from one of the balance-reporting credit cards to pay off one auto loan, and the util% on that card rises from 35% to 55%, but the auto loan goes from $11k/$15k to $0/$15k, will that tank my FICO score?

What if I leave like $50 on that auto loan and reamortize the payments, so I pay like $1.50 a month on it but it stays open, will that make a difference? (keep in mind I have another auto loan, which is at about $9k/$12k).

I already initiated the balance transfer, but if it would be horribly detrimental, I can simply pay off the CCC instead of the auto loan (the BT is going to end up in my bank, but it IS a BT, not a cash advance).