topic Re: Time for my scores to take a hit when balances report in Understanding FICO® Scoring

Time for my scores to take a hit when balances report

masscredit — Sat, 28 Nov 2015 07:21:26 GMT

I'm going to do something that many have suggested. That's let balances report instead of PIF before the statements close. I usually just have one card reporting a balance. That keeps my total utilization at 1%. I currently have 7 cards. 6 of those will be reporting balances next month. I'm estimating my JCP and Walmart cards will show balances in the $100-$200 range (limits are $10K and $6K), Merrick will show a balance of about $1000 of the $1600 limit, Barclay Rewards card will be close to $6K ($10,500 limit), Apple Rewards card will show a balance of about $850. The limit on that one is $4400. And my Quicksilver card will show a balance of $1325. Current limit is $9K. I'm going to pay my Venture off in a few days then request a CLI on the 6th. That will be about 6 months since the last increase. Then I'll roll that limit into my QS card.

This is going to feel strange because I've been doing the same thing for awhile. It took a lot of active monitoring of my credit and time to get my scores where they are (recovering from a BK). I don't like to lose any points. I feel like I'm the pilot of a plane that is about to toss it into a nose dive. Everything will go back to normal after I pull out of that dive in a couple of months. Maybe I'll even gain a few extra points in the long run.

My only concern is I'll spook some of these credit card companies. Ok, maybe just one... Barclay. I never carry a high balance so I don't want them to get worried then start lowering my limits. I have a no interest BT offer from them so I wrote a $5K check to myself. I'll let the high balance report for a little while then pay it off. I'll probably pay $500.-$1K each month.

If I had to guess, I'd say I'm going to lose 25-30 points with all of these cards reporting next month.

Re: Time for my scores to take a hit when balances report

Anonymous — Sat, 28 Nov 2015 15:32:31 GMT

Good luck, MC!

I was a little unclear what you were doing with your Barclays. Something about writing a check to yourself? Regardless, as far as I can tell, you don't have an urgent need for the 5-6k. It's almost as though you were thinking that, purely for its credit score impact, you felt like there might be an advantage to carrying a large balance for 8 months and paying it off slowly.

You probably know this, but if you are curious to see what it is like to have all your cards reporting, it's possible to just let them all report but without such large balances. As it is right now part of any score hit might be related to some of the cards reporting far higher per card utilizations than they ever had. A more controlled way to dip your toe in this water (you share your fear of a massive nose dive) would be to let them all report but with a total U of 4-5% and each card < 39%. Then you could see what that was like and what kind of comfort level you felt.

Re: Time for my scores to take a hit when balances report

masscredit — Sat, 28 Nov 2015 16:28:29 GMT

I received two sets of balance transfer checks from Barclays. Can use them for bills or write them to myself. They are -

The first two (blue) -
0% promotional APR through at least February 1, 2017
Transaction fee: Greater of $5 or 1%

The second two (white) -
0% promotional APR tjough at least May 1, 2017
Transaction fee: Greater of $5 or 3%

Transaction(s) most post to account by January 4, 2016

Promotional APR through the last day of the billing cycle that ends on or after February 1st / May 1st.

I was looking for a way to make some money off of that offer. Maybe an investment or something. Actually, I'm still looking. I'll get 3.04% on the first $500.00 from DCU. The other reason for taking advantage of that offer is to possibly increase my chances of getting another decent CLI. It will show experience with the credit line, carring a higher balance and paying it off instead of doing the PIF thing all of the time. I know that isn't gaurenteed but it might help. I'd like to see that limit climb just a little bit higher. Maybe to around $15K.

Re: Time for my scores to take a hit when balances report

NRB525 — Sat, 28 Nov 2015 16:38:23 GMT

Thanks for sharing. Looking forward to the results.

I suspect the biggest movers will be the Merrick and the Barclay, because both are going over 50%. Barclay more points because it's a larger amount AND over 50%. At least, relative to EQ and EX. Keep track of those two as they drop below 50% later, and see what the follow on result is.

The number of cards is likely to be the mover for TU.

I expect there will be other, lesser moves for the other cards, when they report. It would be interesting to see your actual sequence of score changes.

This is my estimate for the likely impact of the major items. Not scientific of course, just derived from my own observations of balance changes and numbers of cards reporting.

Keep us posted. Good stuff.

Re: Time for my scores to take a hit when balances report

Anonymous — Sat, 28 Nov 2015 17:28:25 GMT

Thanks, MC. Bear in mind that the transaction fee will likely be greater than you will make in an investment. Any investment would have to be very short term, something like a high interest savings account, and these are earning very little money right now (roughly 1%, upon which you pay taxes). Example: $5000 balance transfer = $50 cost (assuming you can do it with your 1% fee checks). $5000 paid off over $12 months = average investment amount of $2500, yielding $25. Of the $25, maybe $7 goes to state and federal taxes. So you pay $50 and get an $18 return.

Bear in mind too that, as you are intending, your upcoming approach with your Barclays establishes you as someone who creates a large balance and then carries it for many months. I.e. it establishes you as a "revolver." Future lenders will be able to see that, and that is a behavior associated with being higher risk. Fannie Mae is requiring all mortgage lenders to begin factoring this in to their decisions (starting next year). Other lenders may already be doing that.

http://mobile.nytimes.com/2015/10/25/realestate/a-focus-on-credit-history-formortgage-approvals.html?referer=https%3A%2F%2Fwww.google.com%2F&_r=0

Re: Time for my scores to take a hit when balances report

masscredit — Sat, 28 Nov 2015 17:47:48 GMT

NRB525 - Thanks for posting that! I'm going to be watching my EQ and TU scores. EX is harder to follow unless I keep paying for a new report here. I'm courious to see what happens.

The small investments won't give me much if anything. I wish I would have bought Amazon this time last year. It was $338.00 on this date last year. Up to $673.00 now. Stocks are risky with something like this. A friend does pretty good with estate sales. I'm starting to research that. Flip a few products and come out ahead.

I didn't know that it was a negative thing to be considered a revolver. Maybe because I never do that. There's really a fine line when it comes to credit. If you don't use your cards much or PIF before the statement closes, lenders can say that you haven't established a history with the credit line. But then carrying a balance and paying it down isn't good either. Have to stay in that small area of using the card then PIF after the statement closes.

Re: Time for my scores to take a hit when balances report

NRB525 — Sat, 28 Nov 2015 18:13:30 GMT

@Anonymous wrote:

Bear in mind too that, as you are intending, your upcoming approach with your Barclays establishes you as someone who creates a large balance and then carries it for many months. I.e. it establishes you as a "revolver." Future lenders will be able to see that, and that is a behavior associated with being higher risk. Fannie Mae is requiring all mortgage lenders to begin factoring this in to their decisions (starting next year). Other lenders may already be doing that.

http://mobile.nytimes.com/2015/10/25/realestate/a-focus-on-credit-history-formortgage-approvals.html?referer=https%3A%2F%2Fwww.google.com%2F&_r=0

Good link, and while it seems Fannie Mae is planning to adjust to tag "revolvers" I wonder what the details of that tag involve? For example, carrying a $1k balance for 6 months, is that high risk? A $5k charge that appears one month and is paid off in the next two payment cycles? $50k that has dropped to $25k over the 30 months? Yeah, the latter (mine) is high risk, and from the article looks to be a criteria to be implemented (not sure exactly how it all gets accurately gathered/measured) but as to all lenders not liking that, my credit card companies seem to be Ok with taking on the risk of BT offers to me, at least at this point in my balance pay down.

It is, generally a good idea to get a longer view of an applicant credit history, no doubt about that. The open questions would be how does it get accurately accumulated, and what impact on the outcome, on the perceived risk premium, on actual offered mortgage rates, is there?

Re: Time for my scores to take a hit when balances report

Anonymous — Sat, 28 Nov 2015 19:52:45 GMT

@masscredit wrote:
NRB525 - Thanks for posting that! I'm going to be watching my EQ and TU scores. EX is harder to follow unless I keep paying for a new report here. I'm courious to see what happens.

The small investments won't give me much if anything. I wish I would have bought Amazon this time last year. It was $338.00 on this date last year. Up to $673.00 now. Stocks are risky with something like this. A friend does pretty good with estate sales. I'm starting to research that. Flip a few products and come out ahead.

I didn't know that it was a negative thing to be considered a revolver. Maybe because I never do that. There's really a fine line when it comes to credit. If you don't use your cards much or PIF before the statement closes, lenders can say that you haven't established a history with the credit line. But then carrying a balance and paying it down isn't good either. Have to stay in that small area of using the card then PIF after the statement closes.

The good news is that it's pretty easy to do that. If you have autopay set up, you can tweak it to pay the balance of the last statement in full. That's one of the primary options. Boom, your done. Use your cards, they generate statements, the issuer takes care of debiting your checking account for the PIF. Some people like doing manual payment instead, but even then you just contact all your issuers and tell them to make your due date on (say) the 10th of the month (for every card). Then pay all your bills on the 1st.

The revolver-transactor distinction is comparatively recent, because until just a few years ago, the CRAs weren't collecting this kind of extended balance and payment data on credit cards. As long as you weren't late, all they collected was your most recent reported balance. Now they record the balance reported and how much of it you later paid, and they do that for many months in a row. So it is now possible for lenders to see whether you carry CC balances or PIF.

As NRB525 points out, a credit card company may find revolvers both worrisome and attractive, since if they can somehow detect that the revolver is likely to pay lots of interest but never default (a certain rare kind of customer) then they are going to like him. But revolvers in general are at much greater risk of default, so they worry too. In the case of a lender offering you a fixed rate installment loan (mortgage, auto, student loan, etc.), however, all he cares about is your probability of default -- so when he sees you are a revolver that's just a plain worry.

Re: Time for my scores to take a hit when balances report

NRB525 — Sat, 28 Nov 2015 22:38:29 GMT

With most of my cards, once they get out of the initial bonus spend time period, or are on a 0% BT pay down, they get put on a fixed amount autopayment, which is geared to be more than the most likely charges in any month, or to pace the BT down, so usually something over $200. Then I have to give those cards their own "payment amount" such as $201 for card 1, $202 for card 2, etc, because otherwise it can be difficult to pick them out of a bank statement to verify payment.

Some are just outright PIF.

This works for most banks, except Chase. For some reason, Chase has "Minimum Payment" and "PIF" as the only two real options for autopayment. On the non-cobranded cards like Slate and Freedom, one has to go to the Blueprint options to add another amount to pay more than minimum, which is kind of an interesting hassle. Blueprint doesn't exist for cobranded Chase cards. But it is what it is.

Bottom line is, autopayment is something that should be turned on, even if one plans to pay prior to statement cut. It provides one more layer of automation to prevent problems in ensuring at least the scheduled minimum is paid on time. You are always free to step in front of the autopay and pay another amount, and the system will just deal with what is left when the autopay date comes up.

Re: Time for my scores to take a hit when balances report

Anonymous — Sat, 28 Nov 2015 22:49:40 GMT

Yup, I totally agree! Autopay should always be turned on.

Re: Time for my scores to take a hit when balances report

Anonymous — Sun, 29 Nov 2015 00:32:57 GMT

Typically I wouldn't recommend it, but I have my mortgage on autopay. That's is the reason I have never late!

It's served me well these past 20 years

Re: Time for my scores to take a hit when balances report

masscredit — Sun, 29 Nov 2015 01:07:27 GMT

I don't trust my money in banks so I usually don't keep much cash in my accounts. I keep track of when all of my payments are due (credit cards and utilities). A few credit cards are due at the beginning of the month and the rest of my bills are in the middle. I jump online twice each month and work down the list.

I'm sure autopay does work well for some. Don't have to worry about forgetting to make payments. Just make sure there is enough in the account or there is enough available credit to cover them.

Maybe I just have control issues

Re: Time for my scores to take a hit when balances report

Anonymous — Sun, 29 Nov 2015 01:37:51 GMT

Just for clarity. all NRB and I were saying is that Autopay should minimally be like the big net underneath the trapeze artists. Sure, maybe a given performer is so skilled that they have never slipped up once. But it's borderline crazy to not have it turned on, just in the 1 out of a million chance you do forget.

And then there's guys like me who just give up and get used to the net doing the work. Either way, strongly consider having it turned on.

Re: Time for my scores to take a hit when balances report

Anonymous — Sun, 29 Nov 2015 02:02:55 GMT

I should have mentioned that the autopay mortgage is from account that I normally only have enough for mortgage and one of 2 car payments.

My day to day account is a totally different account with a different financial institution.

Re: Time for my scores to take a hit when balances report

masscredit — Tue, 01 Dec 2015 01:18:12 GMT

I forgot to mention my Target card in my first post. They closed the account because I had a few payments returned. I had the wrong bank account info when I set that up so 2 of them were bounced back then I forgot to transfer enough money to cover Target and my insurance payments so they pulled the plug. My fault.

This is what I have so far -

November 13th -

Cap 1 - $636.00
Target - $236.00

November 17th -

Cap 1 - $636.00
Target - $236.00
Barclay Apple Rewards - $824.00

EQ04 -
10/30/15 - 723
11/28-15 - 723 - No change with 3 cards reporting

EQ08 -
11/13/15 - 696
11/14/15 - 693 - 2 cards
11/30/15 - 693 - No change with 3 cards reporting

TU08 -
11/10/15- 720
11/30/15 - 720 - No change with 3 cards reporting

EQ04 score from DCU

EQ08 score from MyFico

TU08 score from Walmart

Re: Time for my scores to take a hit when balances report

masscredit — Sat, 12 Dec 2015 04:43:19 GMT

After reading some posts here, I'm starting to think that I should abort this mission and just let a couple cards report at once instead of most of them. Don't want to end up like this member - http://ficoforums.myfico.com/t5/Credit-Cards/Capital-One-Just-Closed-All-4-of-My-Cards/td-p/4362242 . Updated details for that start at post 185.

In a way I shouldn't be worried but I'd hate to CLDs or closed accounts because lenders see a bunch of balances shooting up and scores going down.

Thoughts?

Re: Time for my scores to take a hit when balances report

NRB525 — Sat, 12 Dec 2015 18:19:16 GMT

Going from "all cards but one at zero" to "everyone out of the SD!" counts as a shock to the score, yes. It does not guarantee AA, but as a shock, it is a possible trigger.

Going slowly, gradually letting the statements see the light of day two at a time, over several months, is a reasonable approach.

ETA: However, the particular thread you are referencing had CapOne taking issue with a series of large cash advances on a CC. A different situation than you have here. The Barclays card has to report a balance, since that is the largest of your bunch, and Barclays knows about it. Bringing one other card to a small balance, geez, I'd hope that's not an issue for Barclays, but with Barclays in your mix, keeping the new balances under control is advisable.

Full disclosure: I don't have any Barclays cards, was denied for the Arrival+ in 2014, and it's probably for the best.

Re: Time for my scores to take a hit when balances report

masscredit — Tue, 15 Dec 2015 03:33:39 GMT

I think I'll continue with my plan for now but I'm going to keep the Barclay and Merrick statement balances under 50%. I just paid Barclay down to 48%. Next month I'll pay most of the cards off. Both Barclay balances have a 0% promotion so I'll let both of them report for a little while. Courious to see what that does to my scores. I might even find a sweet spot that is higher than what I've been allowing to report.

Re: Time for my scores to take a hit when balances report

masscredit — Tue, 29 Dec 2015 00:09:36 GMT

New update -

December 19th -

Cap 1 - $1322.00/$9000.00 - 14%
Target - $159.00/$3000.00 - 5%
Barclay Rewards - $5108.00/$10,500. - 49%
Barclay Apple Rewards - $712.00/$4400.00 - 16%
Walmart - $251.00/$10,000 - 2%
JCP - $9.00/$6500.00 - <1%

Total - $7558.00 - Total utilization - 14%

EQ08 -
678 - minus 15 points - minus 18 points total

TU08 -
717 - the new balances might not have hit this one yet - minus 3 so far

Re: Time for my scores to take a hit when balances report

masscredit — Thu, 21 Jan 2016 02:40:28 GMT

Last update before I start paying my cards off -

Cap 1 - $1322.00 / $9000.00 - 14%
Cap 1 - $0.00 / $12,000.00 - 0%
Target - $159.00 / $3000.00 - 5%
Barclay Rewards - $5108.00 / $10,500. - 49%
Barclay Apple Rewards - $712.00 / $4400.00 - 16%
Walmart - $251.00 / $10,000 - 2%
JCP - $9.00 / $6500.00 - .001%
Merrick- $778/00 / $1600.00 - 49%

$8339.00 - Total utilization 15%

Total points lost -

EQ04
723 - 718 - minus 5 points

EQ08
696 - 678 - minus 18 points

TU08
723- 717 - minus 6 points then up to 728 - strange

EX08
690 - 683 - minus 8 points

I don't know about the TU score. It from 723 to 720 and then to 717 which was fine. I checked the score this morning and saw that it went to 728 which is the highest that it's been so I started rebuilding. Pulled up the report and don't see any changes. The last IIB account fell off a few months ago and I still have 3 liens and a BK reporting. Maybe the score liked the higher utilization. I'll see what happens when I start paying accounts off next week. I'll just have two accounts reporting balances the end of this month. Both of my Barclay cards have promotional offers so I'll continue to let the balances report on them. The rest will go back to zero. Seeing that there wasn't a huge change in my scores, I'll probably start letting more accounts report balances starting next month.