topic Re: How does "High Balance" affect me? in Understanding FICO® Scoring

How does "High Balance" affect me?

Anonymous — Thu, 02 Jun 2016 18:17:08 GMT

So, I know that utilization percent is how much balance you actually carry on the statement. I've been keeping this under 6%, in fact last month by accident i made it 0%.

But this month I had a situation where some unexpected expenses coinsided with my rent payment, and I basically need to float about $800 until next month. My limit is $1300.

Right now my high balance is reported as $350, so this will push it up to $800. Does FICO factor this at all? What about lenders... they will look at this high balance negatively?

Re: How does "High Balance" affect me?

Anonymous — Thu, 02 Jun 2016 18:31:21 GMT

You might take a temporary ding for reporting at more than 50% usage. But as soon as you pay it down and it reports the new lower balance you should pop back up.

Re: How does "High Balance" affect me?

RobertEG — Thu, 02 Jun 2016 19:03:48 GMT

High balance is not normally a direct scoring factor except for some open-ended accounts such as some AMEX cards that do not have a specific pre-set credit limit.

For such accounts, FICO uses the high balance as a sub for credit limit in calculation of % util.

Re: How does "High Balance" affect me?

RonM21 — Fri, 03 Jun 2016 01:49:18 GMT

The utilization % is the key here, not so much what the balance number is. Do you only have this one card?

Re: How does "High Balance" affect me?

elim — Fri, 03 Jun 2016 02:13:19 GMT

High Balance is a tool to me. I let my balances report before I pay them in full. I think it shows usage in a positive way. Many of us move limits or have been CLD during a recession and have High Balance many times our limits. Never a problem for me. In fact... I try to report the largest High Balance possible on an Amex charge card. :]

I don't think lenders mind a card holder that spends $$$, and I don't mind thinking they see it in the high Balance on a PIF'd card.

Don't read to much into it, and/or don't sweat the small stuff.

^ IMH buzzed O

ETA I asked the same question in a post about 2 years ago so you must be on the right track, lol. best of luck

Re: How does "High Balance" affect me?

grillandwinemaster — Fri, 03 Jun 2016 13:12:31 GMT

You will lose points. But its just temporary. Fico has no memory, so you will bounce back as soon as you pay it back down.

Re: How does "High Balance" affect me?

Anonymous — Fri, 03 Jun 2016 16:15:59 GMT

I think I may not have been clear in my OP, as it seems the only answer that applies to my question is Robert's.

Uti % is calculcated as (Current) Balance / Limit when the statement cuts (or the company's "reporting" day to the CRAs). At that point, they will look at your Balance and report that on your Credit Report.

I am not talking about the Balance.

There is another entry on the credit report called 'High Balance' as it's a historical record, like a high score of the most you've ever put on the card. NOT the most reported to the CRA which would affect the score, but just the most you've filled up the card in it's history.

So I was asking if I can pretty much max out my card, and then pay it back down to 6% UTI BEFORE the statement/reporting day hits without affecting my score.

My credit report would then show:
Balance: $100
Limit: $1300
High Balance: $1250

and my uti should be $100/$1300 = ~8% UTI

So according to Robert, and that's confirmed what I pretty much thought, FICO does not look at this "high balance" entry UNLESS the credit card is a charge card like an AMEX which doesn't even have a limit. In that case, FICO will use the "high balance" as a limit, and it will calculate your UTI % based on "(Current) Balance / High Balance" instead of "(current) Balance / Credit Limit."

Thanks everyone for responding!

Re: How does "High Balance" affect me?

Thomas_Thumb — Mon, 06 Jun 2016 22:26:55 GMT

@Anonymous wrote:
So, I know that utilization percent is how much balance you actually carry on the statement. I've been keeping this under 6%, in fact last month by accident i made it 0%.

But this month I had a situation where some unexpected expenses coinsided with my rent payment, and I basically need to float about $800 until next month. My limit is $1300.

Right now my high balance is reported as $350, so this will push it up to $800. Does FICO factor this at all? What about lenders... they will look at this high balance negatively?

High balance is only a placeholder or marker that represents the highest amount you let report on a monthly statement for that card. Typically the high balance listed is your highest reported balance during the last 2 years (as a minimum - could be much longer). If you allow $800 to report, your high balance will show as $800 for the next two (or more) years. That's really not an issue

It is the current (or latest) balance that is used to calculate utilization on revolving credit cards.

1) So, in your case, next month your UT% on that card will be $800/$1300 = 61.5%. That's over 50% so you likely will see a temporary score drop as a result.

2) Let's say the following month you only let $100 report. Now your utilization (current balance)/CL = 100/1300 = 7.7%. You're back in optimum territory.

As RobertEG mentioned, things are looked at differently with an AMEX no preset spending limit (NPSL) charge card. With these cards you have no credit limit. In that case a psuedo utilization is calculated based on current balance/high balance. Frankly, that sucks for me as I have an AMEX charge card with a relatively low high balance. As a result, when I actually use the card it is relatively easy to reach "high utilization" status.

As an example [for an AMEX charge card] lets say HB is $1500 although "hidden" authorization is $50,000. Like most charge card owners you charge a few things and then pay in full the statement amount - true charge card terms require PIF. If statement was $800 then psuedo UT = 800/1500 = 53% even though hidden "CL" is $50k.

One way to address this is to put a major purchase (or downpayment) on the card to boost. So we allow $15k to report on a statement. Now HB increases to $15k and utilization that month is OMG, 100%! (but really less than 30% based on hidden $50k limit). Time for a major smackdown in score. Fortunately, score hit is point in time. After balance is paid (as required with a true charge card) then subsequent psuedo utilization will be (current statement balance)/$15,000 instead of (current statement balance)./$1500

Re: How does "High Balance" affect me?

SouthJamaica — Mon, 06 Jun 2016 22:33:56 GMT

@Anonymous wrote:
So, I know that utilization percent is how much balance you actually carry on the statement. I've been keeping this under 6%, in fact last month by accident i made it 0%.

But this month I had a situation where some unexpected expenses coinsided with my rent payment, and I basically need to float about $800 until next month. My limit is $1300.

Right now my high balance is reported as $350, so this will push it up to $800. Does FICO factor this at all? What about lenders... they will look at this high balance negatively?

Utilization is based on the amount reported in the statement, not the amount "carried". The term "carried" means carried over from one cycle to another. What you referred to as "float" is "carry".

Second, your "high balance" is irrelevant to utilization. All that matters is your reported balance and your credit limit.

So I'm not 100% sure what you meant, but if what you're saying is that your reported balance is going to be $800 on a $1300 credit limit card, and you're asking if that will be viewed negatively, the answer is yes it will.

The good news is that it will only be viewed negatively for that one statement. Utilization is totally temporary.

If you're wondering whether the change in "high balance" will have any lasting effect on your FICO score, the answer is no.

Re: How does "High Balance" affect me?

Aahz — Tue, 07 Jun 2016 17:31:08 GMT

@Thomas_Thumb wrote:
High balance is only a placeholder or marker that represents the highest amount you let report on a monthly statement for that card. Typically the high balance listed is your highest reported balance during the last 2 years (as a minimum - could be much longer). If you allow $800 to report, your high balance will show as $800 for the next two (or more) years. That's really not an issue

The high balance reported does not need to be the statment balance. If you charge $1000 to a credit card, then PIF before statement cut, the $1000 will still appear in the High Balance box on your report.

I don't know if this is true for NPSL charge cards, as I don't use charge cards, but it's true for credit cards.

Re: How does "High Balance" affect me?

Thomas_Thumb — Tue, 07 Jun 2016 22:05:28 GMT

@Aahz wrote:
@Thomas_Thumb wrote:
High balance is only a placeholder or marker that represents the highest amount you let report on a monthly statement for that card. Typically the high balance listed is your highest reported balance during the last 2 years (as a minimum - could be much longer). If you allow $800 to report, your high balance will show as $800 for the next two (or more) years. That's really not an issue
The high balance reported does not need to be the statment balance. If you charge $1000 to a credit card, then PIF before statement cut, the $1000 will still appear in the High Balance box on your report.

I don't know if this is true for NPSL charge cards, as I don't use charge cards, but it's true for credit cards.

Aahz, I appreciate the clarification regarding high balance. I never prepay and didn't think of that scenario.

So, perhaps I could put a large charge on my AMEX to jack up HB and then pay it off before statement cuts. That might avoid a point in time credit slam. However, I think it would be more interesting to see how score reacts to 100% "psuedo utilization".

Re: How does "High Balance" affect me?

Anonymous — Wed, 08 Jun 2016 12:05:01 GMT

I think one of the things the OP is getting at is whether or not the visible "high balance" on an account that can be seen by a lendor/creditor can be a deterrant. Like if a card has a $10k limit and 99 times out of 100 the card holder has PIF or left a balance of a few hundred bucks, then that 1 time out of 100 they had an $8000 balance which was immediately PIF the following month after it reported... we all know that month that it reported there would be a score hit, and that the following month it was paid off scores would rebound. However, for the next several years (maybe longer) on that account info it will say "high balance $8000" which anyone looking at the account, possibly considering extending new credit, can see was 80% at one point. I think the OP may want to know if that small 80% snapshot could be a deterrant to whoever is looking at the account.

I think it can be argued both ways. One, it shows that the card holder reached 80% utilization AT LEAST once (you don't know how often)... however, the converse argument is that now they have a $0 balance so it shows that they are able to pay down that 80% to 0% which in fact is a greater sign of creditworthiness.

Overall, then, I don't really think that "high balance" really matters to anyone as these two arguments can cancel each other out.

Re: How does "High Balance" affect me?

Aahz — Thu, 09 Jun 2016 03:17:00 GMT

@Anonymous wrote:
I think one of the things the OP is getting at is whether or not the visible "high balance" on an account that can be seen by a lendor/creditor can be a deterrant. Like if a card has a $10k limit and 99 times out of 100 the card holder has PIF or left a balance of a few hundred bucks, then that 1 time out of 100 they had an $8000 balance which was immediately PIF the following month after it reported... we all know that month that it reported there would be a score hit, and that the following month it was paid off scores would rebound. However, for the next several years (maybe longer) on that account info it will say "high balance $8000" which anyone looking at the account, possibly considering extending new credit, can see was 80% at one point. I think the OP may want to know if that small 80% snapshot could be a deterrant to whoever is looking at the account.

I think it can be argued both ways. One, it shows that the card holder reached 80% utilization AT LEAST once (you don't know how often)... however, the converse argument is that now they have a $0 balance so it shows that they are able to pay down that 80% to 0% which in fact is a greater sign of creditworthiness.

Overall, then, I don't really think that "high balance" really matters to anyone as these two arguments can cancel each other out.

Wether it's good or bad depends on the overall look of the file.

If the file's got a lot of recent dirt then the HB would likely be assumed to be recent (possibly chronic) and indicate someone who's on the road to default.

But if the file is long and clean then it shows the prospective creditor that this is a person who USES their cards, thus generating more profit than someone who does not and, due to the long history of clean reporting is a safe risk as well.

Re: How does "High Balance" affect me?

Anonymous — Thu, 09 Jun 2016 23:44:19 GMT

Overall look of the file is important, no doubt, but I think the most recent history is the most important. You can have someone with a so-so file with some dirty stuff in the recent past (say 1-3 years) but if he just ran up his $10k card to 90% utilization last month but PIF this month down to 0% utilization, I don't think the $9k reported "high balance" is as negatively significant as his "dirty" file may suggest as he just paid off $9k in a month seemingly without a hitch. Certainly his income supports the ability to conquer that high balance in 1 monthly cycle which can be viewed as positive creditworthiness.

Conversely, one could have a 100% clean file and their $9k "high balance" could have been 6 years ago, but they are just paying off that $9k today having carried significant utilization for a large portion of the last 6 years. While this person has a cleaner file, likely higher scores and has been consistent in making payments over 6 years it would suggest to me that based on all of the interest they had to pay over that time and the length of time required to pay down that balance that they financially were unable to do any better than they did.

I could see one making an argument for either of these people as possessing creditworthiness prowess.

Re: How does "High Balance" affect me?

elim — Fri, 10 Jun 2016 00:04:23 GMT

@Anonymous wrote:
I think one of the things the OP is getting at is whether or not the visible "high balance" on an account that can be seen by a lendor/creditor can be a deterrant. Like if a card has a $10k limit and 99 times out of 100 the card holder has PIF or left a balance of a few hundred bucks, then that 1 time out of 100 they had an $8000 balance which was immediately PIF the following month after it reported... we all know that month that it reported there would be a score hit, and that the following month it was paid off scores would rebound. However, for the next several years (maybe longer) on that account info it will say "high balance $8000" which anyone looking at the account, possibly considering extending new credit, can see was 80% at one point. I think the OP may want to know if that small 80% snapshot could be a deterrant to whoever is looking at the account.

I think it can be argued both ways. One, it shows that the card holder reached 80% utilization AT LEAST once (you don't know how often)... however, the converse argument is that now they have a $0 balance so it shows that they are able to pay down that 80% to 0% which in fact is a greater sign of creditworthiness.

Overall, then, I don't really think that "high balance" really matters to anyone as these two arguments can cancel each other out.

Like I said... Some of us move limits, reduce limits, or have been CLD during a recession, and have High Balance listed as many times greater than the current limit. It hasn't led to a denial (for me) and when I asked the LO at my CU, while we were looking over my reports, she said "it's fairly common and is not a factor. It looks like you purchased a large item and paid it off"

example...

Limit 3.5k

Balance $0.00

High Balance $11,277.08

Re: How does "High Balance" affect me?

Anonymous — Fri, 10 Jun 2016 01:46:10 GMT

Right, the key part of what you said being "...and paid it off."

Having a high balance is certainly far less of a factor if it's for 1 cycle and will always be far less of a concern if it is short term rather than long term.