topic Re: Anyone have absolute proof that keeping a zero balance lowers your score? in Understanding FICO® Scoring

Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 05:18:37 GMT

I have 2 cards that I have paid down to zero. I don't plan on using them any time soon, because they have zero perks. I want to keep them open though, so that I keep my AAoA up and utilization down.

Does anyone have any solid proof that this does in fact lower your score? Verses keeping them at 1%? All I can find on the web is "I was always told.........." or "My Father said......"

If it is absolutely true...... Is it like 5 points or is it more like 20 off your score?

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 05:51:14 GMT

I don't have absolute proof either way.

BUT -- if they're not the only cards you have, the bigger concern would be having them closed by the creditor for inactivity so make sure you dust them off and use them on occasion if you wanna keep them alive.

The only thing I know for sure is if a card is zero'd out and SD'd it won't be reporting payment history (because payments aren't being made). I've got one LOC that hasn't reported anything since last December at all, and it says so on my CRs (12/18/2015 IIRC). Now that we're in late October I suppose I ought to dust it off and use it if I wanna keep it. So if you need to show payment history or if they're your only cards, your report could just sit there doing nothing for a while.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 05:59:10 GMT

I have 2 other cards. I have a BoA 1,2,3 rewards card which I use daily. Then I have a Chase card (with 0% interest for 13 more months) that I have about a $2300 balance on.

Yeah... I planned on buying lunch or something silly on the sock drawered cards every here and there to keep them 'alive'. But when I do that.... I want to pay them in full.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

iheartwings — Thu, 20 Oct 2016 06:21:40 GMT

@Anonymous wrote:
I have 2 cards that I have paid down to zero. I don't plan on using them any time soon, because they have zero perks. I want to keep them open though, so that I keep my AAoA up and utilization down.

Does anyone have any solid proof that this does in fact lower your score? Verses keeping them at 1%? All I can find on the web is "I was always told.........." or "My Father said......"

If it is absolutely true...... Is it like 5 points or is it more like 20 off your score?

For many months, I had scores that didn't move up....or down (with the exception of EQ which slowly crept up about 5 points over the course of 3 months). They were rock solid the same each month. Then, I had a month where I had no CC utilization report on my CRs.

My scores dropped - EQ 18, TU 12, EX 23. The only changes were I had a little more AAoA because it was another month, and my loan balances decreased ever so mildly. (TU and EX were rock solid the same for the three months prior, and my EQ had only up 5 in the 3 months prior).

The next month, I let a balance report on a card, and my scores came right back up.

I think how much depends on your particular file (and whether or not you've optimized your other categories). For me, it was over 10 points on each CR when I don't let a card report.

HTH

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 06:22:17 GMT

Great info. Thank you!!!

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 11:54:39 GMT

@Anonymous wrote:
I have 2 other cards. I have a BoA 1,2,3 rewards card which I use daily. Then I have a Chase card (with 0% interest for 13 more months) that I have about a $2300 balance on.

Yeah... I planned on buying lunch or something silly on the sock drawered cards every here and there to keep them 'alive'. But when I do that.... I want to pay them in full.

Based on this post you will have at least 1 card reporting a balance every month, right? If this is true allowing the two cards you asked about in your opening post to report $0 balances should help your scores because it will lower your overall utilization. Allowing all of your credit cards to report a $0 balance could have a negative impact on scores, but that's not your current situation.

As a side note, you don't have to micromanage your utilization unless you're making changes to your credit profile (ie: CLIs, applying for new credit, buying a house, etc).

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 14:30:44 GMT

+1
On the above poster

I think the $0 Balance deal must have been a bit oversold to the OP

Regarding scoring it's not about a prolonged $0 balance on this or that card...the point whomever was probably trying to make was about having an entire credit profile reporting with nothing but $0 balances.

This is because the profile could be seen as dormant vs looking well managed ( that's why you hear the 1-9% is better than Ghost) ...but that only matters if there is ZERO activity otherwise.

You don't have that issue, cause you have a daily + you have an account with a $2300 balance, so your profile will be sending non ghost data every month, si you're fine.

* Now as a separate issue, as mentioned...yes a specific vendor might consider closing a SD account B/C they choose not to do biz with you anymore but that isn't a issue of the scoring model, that's like having a gf dump you because you don't call enough 2 different issues.
Btw, for most vendors it would be quite some time before they cut you for non use.

Some ppl say take em out for a walk once a quarter, I think most accounts are ok getting a little run once every 6-8 months...if you use it and pay it the following day, that's enough.

Remember in the case of preventing the non use closure you just need use between you and the vendor, but there is no need to allow any balance to show for credit scoring purposes... you're just forcing the vendor to produce a statement (required because of your at least one transaction that month, even though the credit reporting and closing balance is still zero, because you paid it within one day) but that one transaction has to be noted no matter, even the bubble gum swipe at the gas station.

My point being, one needn't create any new spend, just swipe for an item you were gonna pay cash for and allow your SD card to stretch it's legs and you're good.

Best regards

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 15:37:04 GMT

Thanks again, all of you. I'm glad I brought this up. I learned something this morning.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

JagerBombs89 — Thu, 20 Oct 2016 19:16:37 GMT

Ask and you shall receive:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/My-Credit-Journey-snapshot-Road-to-800/m-p/2691035#M76273

"Throughout the month of December:

1 Balance reporting: 783 FICO Score

2 Balances reporting: 778 FICO Score

3 Balances reporting: 773 FICO Score

4 Balances reporting: 768 FICO Score

End of Decemeber:

1 Balance reporting: 783 FICO (back to normal)

0 Balances reporting: 774 FICO"

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 19:31:07 GMT

1 Balance reporting: 783 FICO Score

2 Balances reporting: 778 FICO Score

3 Balances reporting: 773 FICO Score

This was my follow up question. I have five Credit Cards with two that charge a monthly fee ($8 and $5) repsectively. As result, I always have three CCs (these two and my daily one) that have balances even though I am religiously well under the 10% UTL. I am going to prepay the montly fee on both to see if this applies to me.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Thu, 20 Oct 2016 20:57:20 GMT

Hey Highlander. Any particular reason you haven't closed those cards that charge you monthly fees?

Looks like you are paying over $150 per year in those fees.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

SouthJamaica — Thu, 20 Oct 2016 22:18:35 GMT

@Anonymous wrote:
I have 2 cards that I have paid down to zero. I don't plan on using them any time soon, because they have zero perks. I want to keep them open though, so that I keep my AAoA up and utilization down.

Does anyone have any solid proof that this does in fact lower your score? Verses keeping them at 1%? All I can find on the web is "I was always told.........." or "My Father said......"

If it is absolutely true...... Is it like 5 points or is it more like 20 off your score?

Keeping both cards at zero will produce a lower score than having one card at zero and the other showing a small balance.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Fri, 21 Oct 2016 16:37:29 GMT

They are my two oldest CCs from my credit wasteland days. I hate paying the fee, but the AAoA hit would be brutal.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

JagerBombs89 — Fri, 21 Oct 2016 16:58:51 GMT

If your bank has Bill Pay, you can "push" a payment to your card that covers all charges plus fees before the statement cut. This way, it will be a $0 balance and those fees won't be reporting.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Fri, 21 Oct 2016 17:36:53 GMT

@Anonymous wrote:
They are my two oldest CCs from my credit wasteland days. I hate paying the fee, but the AAoA hit would be brutal.

Hey Highlander. You may be under the impression that if you were to cancel those two cards, it would cause you to take a hit to your AAoA. This is not true. Your AAoA would be unchanged. Closed accounts are factored into account age just as much as open accounts -- and furthermore the closed accounts continue to age.

When the two closed cards fell off your reports, then there would be a change to your AAoA. But that would not be for another ten years -- at which time your AAoA would be far higher. You would also presumably have more accounts by then, which would minimize the drop to your AAoA. Finally, the drop to your AAoA when it did occur might not affect your score, or if it did only a few points.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Fri, 21 Oct 2016 17:48:21 GMT

@SouthJamaica wrote:
@Anonymous wrote:
I have 2 cards that I have paid down to zero. I don't plan on using them any time soon, because they have zero perks. I want to keep them open though, so that I keep my AAoA up and utilization down.

Does anyone have any solid proof that this does in fact lower your score? Verses keeping them at 1%? All I can find on the web is "I was always told.........." or "My Father said......"

If it is absolutely true...... Is it like 5 points or is it more like 20 off your score?
Keeping both cards at zero will produce a lower score than having one card at zero and the other showing a small balance.

Hello SJ. Like many of us (me included) you assumed that the OP's initial post and subject line meant that he had exactly two credit cards (total). Later in the thread he revealed that he had four cards (possibly more) and that two of them will always be reporting a positive balance.

It looks like somebody else caught that and explained to him that the "All Zero = penalty" part of FICO applies to all of his credit cards reporting a $0 balance simultaneously.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

driftless — Fri, 21 Oct 2016 18:00:56 GMT

My score is lowest when all 4 of my cc's report at 0%. Now, I don't worry about it, I keep using my cards and more than likely there will be charges that will hit from the payment due date until when the statement cuts.

Re: Anyone have absolute proof that keeping a zero balance lowers your score?

Anonymous — Mon, 24 Oct 2016 22:04:50 GMT

As, shown by the examples given...Yes, there is a difference between one card or few cards showing a balance.

However, most ppl can't freak out about it because the difference in many cases isn't a death sentence month over month, it's just something to note PRIOR to submitting apps...

That is understanding application manipulation for looking as pretty as possible when apping for your loan or next CC, otherwise the 10-15 point spread isn't a huge deal enough to fret month over month.

Granted a stable, aged profile probably sees less of an affect in comparison to a younger less vetted profile, point being YES this is area can be too much for some to handle.

Many times folks take a morsel and make it a MEAL worth of importance...you see this all the time with the over importance given to a HP, yet folks NOT valuing or quite understanding debt ratio.

Point being it's a balancing act between apping and apping too much...it's always the DETAILS that make things uneasy and unsimplified.

We can speak about one card reporting X % with all others reporting zero as a goal but a goal for what? Every month?
A score of 780 vs 765 isn't that big a deal month over month ...one has to live their lives month over month.
And maybe pay attention to this stuff as need be, yeah, nice to know and consider 'as needed' otherwise for most ppl it's too many balls in the air to juggle monthly.