topic Re: 1% credit card usage versus 0% in Credit Cards

1% credit card usage versus 0%

Anonymous — Tue, 05 Feb 2013 00:57:25 GMT

Can anyone tell me how accurate the FICO Simulator can be? I owe $799 in credit card debt and I used the FICO Simulator to see what my score would be if I had zero balance and it showed my score after 1 month would be the same as now. I also used the simulator to see what my score would be if I paid $200 for 1 month and it showed my score would increase by 25 points. Is it better to have a small balance on one of my credit cards than to have a zero balance on all of them? Thanks a lot.

Re: 1% credit card usage versus 0%

pdog661 — Tue, 05 Feb 2013 01:04:05 GMT

Hi,

I paid all my cards to 0, and my score went down. Remember UTL rounds up so if you let 1 dollar report on 1 card it will show a 1% UTL, and this in my experience will show a higher score then 0% utl. Many on these boards say 9% is the magic number, but for my 1% does better then 9%.

YMMV

Good luck.

Re: 1% credit card usage versus 0%

Anonymous — Tue, 05 Feb 2013 01:08:59 GMT

I have found 1% to be the sweet spot also.

Re: 1% credit card usage versus 0%

lithium78 — Tue, 05 Feb 2013 02:17:12 GMT

This may be a stupid question, but I have always paid every credit card in full, so I don't know the answer: To let a balance report, you have to pay interest for the month, right?

Re: 1% credit card usage versus 0%

jake619 — Tue, 05 Feb 2013 03:21:05 GMT

No. The statement closes and then the grace period begins, usually around 25 days or so. If you fail to pay the posted balance by the due date then interest is imposed.

Re: 1% credit card usage versus 0%

Anonymous — Tue, 05 Feb 2013 06:00:32 GMT

It is not good for scoring to have 0% ulilization, if you look at the graph at credit carma they sort people with 0% in the grade C with people who have 41-60% utilization.

It is not that drastic in general, but you have to borrow money and it has to show that you can borrow and pay it back, if it shows 0 that does NOT build you credit. So Anything between 1-9 % would be cool...

Re: 1% credit card usage versus 0%

Anonymous — Tue, 05 Feb 2013 07:56:36 GMT

On a 1% balance (depending how much total credit card credit one has) is minimal. If you owe just a few dollars on one card it will probably round up and show 1%. For those needing a few points to qualify for a mortgage, it might be worth a few dollars or cents of interest. In addition to using the FICO Simulator, I have used several other simulators on my account and a friends account and they all show a better credit score with a minimal balance. I have 7 cards and carry a balance on only 1 of the cards. I have read that carrying a balance on multiple cards can lower ones score. If someone has additional information on having multiple balances, please let us know. Thanks a lot.

Re: 1% credit card usage versus 0%

SnackTrader — Sat, 16 Feb 2013 15:23:01 GMT

LETTING A BALANCE REPORT DOES NOT MEAN PAYING INTEREST!

Your monthly statement period is around 30 days long every month. You'll notice that at the end of that statement period a balance shows up as "amount due". That is a minimum payment. Another amount shows "balance", which is the total amount you need I pay to avoid interest.

Credit scoring only knows what goes on your credit report. And most (but not all) credit card companies only report to the bureaus once a month. The members here have found that this is almost always on the statement end date. What they report is that "balance" number that exists in the statement end date. We advocate, for highest score, that the amount of your balances reported be zero for all cards except one. That one card should then report 1-9% usage. Once that statement cuts, please pay the remaining balance in full if you can to avoid interest. We do not advocate paying interest, and that has not been shown to in any way increase credit score.

Also, you do not have to do this every month if you do not want to. Most only do it as they are preparing for new applications.

Re: 1% credit card usage versus 0%

SnackTrader — Tue, 05 Feb 2013 12:07:35 GMT

I should have also stated that what I explained is the difference between "letting a balance report" and "carrying a balance". I never carry a balance, but I almost always let a balance report. It makes financial sense to avoid carrying balances if you can.

Re: 1% credit card usage versus 0%

Anonymous — Tue, 05 Feb 2013 12:20:25 GMT

Great information SnackTrader, I appreciate how so many are helping out others. This credit stuff is tricky and we all need as much knowledge about it as we can get. Thanks a lot.

Re: 1% credit card usage versus 0%

lithium78 — Tue, 05 Feb 2013 13:19:20 GMT

How much of a balance should I carry on one card to let the balance report? For instance, if I go with 1% of overall credit limit on one card, it's a significantly higher percentage of that one card's limit. Does that make a difference?

Re: 1% credit card usage versus 0%

SnackTrader — Tue, 05 Feb 2013 15:33:03 GMT

Good question. There was just a big thread with that discussion last week. I'm on my iPhone right now, but when I get home I will try to link to it.

Basically, it will depend on which card you are using for that balance, and it is likely different for everyone (a true YMMV situation). But in general, I would try to keep utilization on your reporting card under 10%, regardless of where that brings total utilization. It could turn out to be 10% on that one card but only 1% of total lines. That should be fine. But you can always play around with it to see what works for you.

Re: 1% credit card usage versus 0%

londonhogfan — Tue, 05 Feb 2013 17:49:44 GMT

This is a great topic and something I've long been curious about.

I have read in other topics that you should pay off all your cards before they report except leave one at 1%... I'm trying to do that on my accounts now. Is it best to let all my cards show a 1% balance?

Also, My wife has a bestbuy card and is carrying a couple grand in a no interest promotion for 24 months. Should she keep all her other cards at 0% to offset or is it still best to carry a 1%?

Thanks for any advice - I've learned so much from the community.

Re: 1% credit card usage versus 0%

jake619 — Tue, 05 Feb 2013 18:05:05 GMT

People seem to have different results at a given percentage between 1 and 9. >10% generally is the breakpoint. From what I see it's highly personal and there is no singular percentage that works for everybody.

Also, be mindful of these data points:

Fused wrote:
Tidbits (this section is courtesy of moderator, Lel)
If a closed CC account with a balance continues to report the original credit limit, then both the balance and the CL of the closed account will be used in the utilization calculations.
If a closed CC account is reporting a zero CL, even if there is a balance on the CC, the card will not be included in the calculations.
If a closed CC account is reporting a non-zero CL but has a zero balance, the card will not be included in the calculations.
If a closed account reports a CL that is equal to the balance (balance chasing), then this will be included in the calculations. This is the worst-case scenario with regard to utilization

^^^^^ Explains exactly why my util calculations never matched up with my report data. I have a closed CC that reports balance and CL.

Re: 1% credit card usage versus 0%

Anonymous — Tue, 05 Feb 2013 20:40:24 GMT

In reference to londonhogfan's question. If you are trying to get your maximum score, I think you should show a balance on only 1 card. Someone else can weigh in but if you have 4 cards and each show a balance, you might not be getting your best score. I originally used the 1% versus 0% but as others stated less than 9% on one card would probably be optimal. One way to see what your score will do as far as carrying a balance or balances is to play around with it a little but I don't think I would play around with all of your cards reporting a balance if you are needing your highest score you are capable of.

I messed up one time when I thought I would force a credit card company to give me more credit. I had a $300 credit card and charged $245 on it. Even though at that time I had 4 cards with over $10K in usable credit, that one card was close to being maxed out and I lost 11 points. I paid that card off and gained the 11 points back the next month. So, even though I used only 2% of my total credit available, that one little card taught me a lesson.

Re: 1% credit card usage versus 0%

SnackTrader — Wed, 06 Feb 2013 00:40:35 GMT

@SnackTrader wrote:
Good question. There was just a big thread with that discussion last week. I'm on my iPhone right now, but when I get home I will try to link to it.

Basically, it will depend on which card you are using for that balance, and it is likely different for everyone (a true YMMV situation). But in general, I would try to keep utilization on your reporting card under 10%, regardless of where that brings total utilization. It could turn out to be 10% on that one card but only 1% of total lines. That should be fine. But you can always play around with it to see what works for you.

Here's the link I promised:

http://ficoforums.myfico.com/t5/Credit-Cards/To-Pay-or-Not-to-Pay-that-is-the-Question/m-p/1827489#M509366

Re: 1% credit card usage versus 0%

distantarray — Wed, 06 Feb 2013 00:47:07 GMT

people always talk about this, the answer for most is 2% on 1 credit card and 0% on all others is found by bobwang who holds a 819 equifax 04 score one of the highest anywhere. I did exactly that and my credit score went up 20+ points before my last app spree.

Re: 1% credit card usage versus 0%

Anonymous — Wed, 06 Feb 2013 01:21:21 GMT

Great info and if a person with an 819 does that, so am I. Thanks a lot.