topic Re: Can I pay my credit card balances in full and still build a credit score? in Understanding FICO® Scoring

Can I pay my credit card balances in full and still build a credit score?

rokobu — Fri, 04 Aug 2023 19:25:18 GMT

Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

Re: Can I pay my credit card balances in full and still build a credit score?

M_Smart007 — Fri, 04 Aug 2023 19:37:42 GMT

@rokobu wrote:
Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

I would recommend reading the below from ABCD2199
The Truth about Credit Card Utilization
My 11 Rules to Credit Rebuilding
FICO Score: What to pay down first?

From Birdman7
General Scoring Primer and Version 8 Master Thread rev.5.17.20

Re: Can I pay my credit card balances in full and still build a credit score?

SouthJamaica — Fri, 04 Aug 2023 21:16:48 GMT

@rokobu wrote:
Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

Paying in full is great for your score.

"Carrying" a balance -- i.e. carrying it over to the next statement period -- doesn't help you at all.

"Reporting" a balance -- letting a balance appear on your reporting date -- isn't necessary; you can pay all but one of your cards off before they report, but you should always let one card report a balance before you pay it off, to avoid the 'all zero' penalty.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Fri, 04 Aug 2023 21:25:51 GMT

Thanks for the thorough explanation. It makes lot of sense now!

@SouthJamaica wrote:
@rokobu wrote:
Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

Paying in full is great for your score.
"Carrying" a balance -- i.e. carrying it over to the next statement period -- doesn't help you at all.
"Reporting" a balance -- letting a balance appear on your reporting date -- isn't necessary; you can pay all but one of your cards off before they report, but you should always let one card report a balance before you pay it off, to avoid the 'all zero' penalty.

Re: Can I pay my credit card balances in full and still build a credit score?

Anonymous — Fri, 04 Aug 2023 22:47:44 GMT

@rokobu wrote:
Thanks for the thorough explanation. It makes lot of sense now!
@SouthJamaica wrote:
@rokobu wrote:
Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

Paying in full is great for your score.
"Carrying" a balance -- i.e. carrying it over to the next statement period -- doesn't help you at all.
"Reporting" a balance -- letting a balance appear on your reporting date -- isn't necessary; you can pay all but one of your cards off before they report, but you should always let one card report a balance before you pay it off, to avoid the 'all zero' penalty.

That said, a subgroup of MyFico have some of the concern raised in your original post, and believe that reporting a balance is a good thing. If you keep reporting All Zero Except One (AZEO) balances, and the one reporting is small, other issuers (i.e. those that you don't have cards with) might consider you as a very light user of credit and not have much interest in offering you a card. They CAN get more detail to show that there is usage, but might not.

But even with all cards reporting 0, you can certainly still get credit.

Re: Can I pay my credit card balances in full and still build a credit score?

CreditCobra — Sat, 05 Aug 2023 00:41:49 GMT

I used to go through the process of trying to figure out when to pay off which cards and such, but I finally just gave up. I don't even pay much attention to when the statements cut on my various cards anymore. Some accounts have a only an item or two that bill to each card once a month, I simply pay those cards off a few days later. Everything else I just pay off every Thursday. That's likely overkill for a lot of folks, but I sleep well at night with this. Sometimes the statement will cut with a small balance owing, but often it will cut at zero. My scores are fine. Not perfect, but fine. They recently took a hit because I opened a few new cards, but they'll be back soon enough.

I think the important thing here, above all else is pay your bills on time, and wait it out.

Re: Can I pay my credit card balances in full and still build a credit score?

OmarGB9 — Sat, 05 Aug 2023 02:58:59 GMT

I think you've gotten great responses so far. Basically it doesn't matter too much what your balance is as long as your card isn't maxed out. Whether you want to have it report no balance, a small balance, or anything in between, is your choice.

AZEO as explained above is one way to approach it.

Re: Can I pay my credit card balances in full and still build a credit score?

GZG — Sat, 05 Aug 2023 04:23:36 GMT

pay off all of your cards in full (or the minimum at the very least) by the due date @rokobu and you'll be all good as it pertains to credit reporting, as long as you pay the minimum off by the due date, you will be given credit for an on-time payment.

@Anonymous wrote:
That said, a subgroup of MyFico have some of the concern raised in your original post, and believe that reporting a balance is a good thing. If you keep reporting All Zero Except One (AZEO) balances, and the one reporting is small, other issuers (i.e. those that you don't have cards with) might consider you as a very light user of credit and not have much interest in offering you a card. They CAN get more detail to show that there is usage, but might not.

But even with all cards reporting 0, you can certainly still get credit.

the nuance and minutiae? of getting the most out of your credit reporting is pretty interesting, although completely unneeded to making sure you're getting credit for your on-time payments

I'll illustrate AZEO and creditor reporting to try to explain what was said above, because it's really interesting, but unless you become interested in this stuff, I wouldn't worry about it too much

to obtain the highest FICO credit score, you want to make sure that when your creditors report your balances to the credit buraeus, what they report looks like this:

Credit card 1: $0 balance

Credit card 2: $0 balance

Credit card 3: $0 balance

Credit card 4: $small balance, 1-3% of your limit or at least like $10

this gives you a small boost in your FICO credit score, and if I was applying for future credit, this is how I would want my credit report to look before doing so.

in order to accomplish this, you need to pay off, pay down the balances of your card prior to your statement date, so that when the creditors report the balances, they look like above

However, creditors have discretion with certain information that they choose to report. Mainly, how much you spent during a billing cycle. They have to report the balance, but if you did what was said above, you've paid down the balance to a really small amount. This causes two different types of reporting:

some creditors will report how much you spent, regardless of if the balance reflected that amount spent:

some creditors however, will hide this information and they won't display it:

This means that when other creditors go to look at your reports, they won't see the fact that you spent $1000 on the card, because you only allowed a $20 balance to report because you paid down that balance prior to the statement date.

You have to check creditor by creditor to see how they report your account information and to see if you should not be paying down those balances prior to the statement being printed in order to make sure future creditors see that you have high spend for future revolving credit considerations.

It's well beyond what anybody should, want or need to know, but it's interesting nonetheless. Personally, I wish the reporting requirements were standarized (more so?) so creditors didn't feel the need to play these games, but oh well.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 03:30:26 GMT

@M_Smart007 wrote:
@rokobu wrote:
Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

I would recommend reading the below from ABCD2199
The Truth about Credit Card Utilization
My 11 Rules to Credit Rebuilding
FICO Score: What to pay down first?

From Birdman7
General Scoring Primer and Version 8 Master Thread rev.5.17.20

Thank you for the links, it was all worth reading! Very helpful.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 03:45:12 GMT

@Anonymous wrote:
@rokobu wrote:
Thanks for the thorough explanation. It makes lot of sense now!
@SouthJamaica wrote:
@rokobu wrote:
Hi,

I'm unclear abut whether I need to leave some balance on my credit cards each month or can I pay them all in full and still build my credit score? As if I use them and pay them in full, they would be reported with zero balances and they would appear as not being used to the credit bureaus. Can someone please help clarify?

Thanks!

Paying in full is great for your score.
"Carrying" a balance -- i.e. carrying it over to the next statement period -- doesn't help you at all.
"Reporting" a balance -- letting a balance appear on your reporting date -- isn't necessary; you can pay all but one of your cards off before they report, but you should always let one card report a balance before you pay it off, to avoid the 'all zero' penalty.

That said, a subgroup of MyFico have some of the concern raised in your original post, and believe that reporting a balance is a good thing. If you keep reporting All Zero Except One (AZEO) balances, and the one reporting is small, other issuers (i.e. those that you don't have cards with) might consider you as a very light user of credit and not have much interest in offering you a card. They CAN get more detail to show that there is usage, but might not.

But even with all cards reporting 0, you can certainly still get credit.

That's a very interesting point indeed. I see that FICO scoring is not as clear-cut as I had imagined just a few days ago. Thanks for letting me know about it!

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 03:58:35 GMT

@CreditCobra wrote:
I used to go through the process of trying to figure out when to pay off which cards and such, but I finally just gave up. I don't even pay much attention to when the statements cut on my various cards anymore. Some accounts have a only an item or two that bill to each card once a month, I simply pay those cards off a few days later. Everything else I just pay off every Thursday. That's likely overkill for a lot of folks, but I sleep well at night with this. Sometimes the statement will cut with a small balance owing, but often it will cut at zero. My scores are fine. Not perfect, but fine. They recently took a hit because I opened a few new cards, but they'll be back soon enough.

I think the important thing here, above all else is pay your bills on time, and wait it out.

Thank you for the reply. I have four credit cards so far and I already feel confused about when to pay their balances and how much to pay to keep their utilization low. At least I can set-up auto paying of minimum balances as a safety net in case I forget to pay accidentaly. But still, it's time consuming to keep balances low for reporting. So I understand why you've chosen to do it the way you descibed.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 04:03:29 GMT

@OmarGB9 wrote:
I think you've gotten great responses so far. Basically it doesn't matter too much what your balance is as long as your card isn't maxed out. Whether you want to have it report no balance, a small balance, or anything in between, is your choice.
AZEO as explained above is one way to approach it.

Yes, I have only joined recently but I must say that this forum is awesome. It's amazing how many supportive and detailed responses I've got already. I'm glad that AZEO is an option as I was worried that I had to leave some balance on each card every month and it was annoying and time consuming to keep managing it. It's also great that other approaches lead to credit score increases too, as long as the balances are small. Thanks for the support!

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 04:19:14 GMT

@GZG wrote:
pay off all of your cards in full (or the minimum at the very least) by the due date @rokobu and you'll be all good as it pertains to credit reporting, as long as you pay the minimum off by the due date, you will be given credit for an on-time payment.

@Anonymous wrote:
That said, a subgroup of MyFico have some of the concern raised in your original post, and believe that reporting a balance is a good thing. If you keep reporting All Zero Except One (AZEO) balances, and the one reporting is small, other issuers (i.e. those that you don't have cards with) might consider you as a very light user of credit and not have much interest in offering you a card. They CAN get more detail to show that there is usage, but might not.

But even with all cards reporting 0, you can certainly still get credit.
the nuance and minutiae? of getting the most out of your credit reporting is pretty interesting, although completely unneeded to making sure you're getting credit for your on-time payments

I'll illustrate AZEO and creditor reporting to try to explain what was said above, because it's really interesting, but unless you become interested in this stuff, I wouldn't worry about it too much

to obtain the highest FICO credit score, you want to make sure that when your creditors report your balances to the credit buraeus, what they report looks like this:

Credit card 1: $0 balance
Credit card 2: $0 balance
Credit card 3: $0 balance
Credit card 4: $small balance, 1-3% of your limit or at least like $10

this gives you a small boost in your FICO credit score, and if I was applying for future credit, this is how I would want my credit report to look before doing so.

in order to accomplish this, you need to pay off, pay down the balances of your card prior to your statement date, so that when the creditors report the balances, they look like above

However, creditors have discretion with certain information that they choose to report. Mainly, how much you spent during a billing cycle. They have to report the balance, but if you did what was said above, you've paid down the balance to a really small amount. This causes two different types of reporting:

some creditors will report how much you spent, regardless of if the balance reflected that amount spent:

some creditors however, will hide this information and they won't display it:

This means that when other creditors go to look at your reports, they won't see the fact that you spent $1000 on the card, because you only allowed a $20 balance to report because you paid down that balance prior to the statement date.

You have to check creditor by creditor to see how they report your account information and to see if you should not be paying down those balances prior to the statement being printed in order to make sure future creditors see that you have high spend for future revolving credit considerations.

It's well beyond what anybody should, want or need to know, but it's interesting nonetheless. Personally, I wish the reporting requirements were standarized (more so?) so creditors didn't feel the need to play these games, but oh well.

Wow, this is very insightful! Thank you for going out of the way to explain it. As if it was not complex enough, each creditor can report my account information in a different way. I would also love to see this standardized, hopefully this may happen some day in the future. I'm curious about this detail and when I get some more time to spare, I will look at how the creditors report my information. Hope that all of them also report the amount I spend. :-)

Re: Can I pay my credit card balances in full and still build a credit score?

Anonymalous — Mon, 07 Aug 2023 13:23:59 GMT

@rokobu wrote:
@CreditCobra wrote:
I used to go through the process of trying to figure out when to pay off which cards and such, but I finally just gave up. I don't even pay much attention to when the statements cut on my various cards anymore. Some accounts have a only an item or two that bill to each card once a month, I simply pay those cards off a few days later. Everything else I just pay off every Thursday. That's likely overkill for a lot of folks, but I sleep well at night with this. Sometimes the statement will cut with a small balance owing, but often it will cut at zero. My scores are fine. Not perfect, but fine. They recently took a hit because I opened a few new cards, but they'll be back soon enough.

I think the important thing here, above all else is pay your bills on time, and wait it out.
Thank you for the reply. I have four credit cards so far and I already feel confused about when to pay their balances and how much to pay to keep their utilization low. At least I can set-up auto paying of minimum balances as a safety net in case I forget to pay accidentaly. But still, it's time consuming to keep balances low for reporting. So I understand why you've chosen to do it the way you descibed.

I think a good compromise is to practice AZEO a month or two before applying for credit, and to just pay off balances when they're due the rest of the time. This minimizes the nuisance of managing balances all the time, while ensuring scores are in peak shape when it matters. When credit limits that are high enough to keep utilization at reasonable levels, scores typically won't swing more than 15 or 20 points. And if the underlying scores are decent, that's not enough to worry about even if there's an unexpected pull like an account review.

Though I'm not sure how that interacts with the new trending models. Both FICO 10T and VantageScore 4.0 will be rising to prominence as Fanny Mae moves toward using them in mortgages.

Re: Can I pay my credit card balances in full and still build a credit score?

Horseshoez — Mon, 07 Aug 2023 14:24:20 GMT

In my case, per my signature, I refused to micromanage my finances and as such, I refuse to employ AZEO. Instead, I pay my cards in full prior to the statement reporting date and let the chips fall where they may; most months a small "pending" charge or two will trickle through between my payment and the cut of the statement and for those months I end up AZEO or AZE2 (and twice now AZE3); I have yet to see even a single point loss from three cards reporting a small balance (i.e. less than $100). That said, three or four times now I've ended up All Zero, and that does result in a point loss of 15-20 points each time it happens; the good news, as most of you know, said point loss is transient and my scores always recover the next month I have a card or two reporting a balance.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 14:59:31 GMT

@Anonymalous wrote:
@rokobu wrote:
@CreditCobra wrote:
I used to go through the process of trying to figure out when to pay off which cards and such, but I finally just gave up. I don't even pay much attention to when the statements cut on my various cards anymore. Some accounts have a only an item or two that bill to each card once a month, I simply pay those cards off a few days later. Everything else I just pay off every Thursday. That's likely overkill for a lot of folks, but I sleep well at night with this. Sometimes the statement will cut with a small balance owing, but often it will cut at zero. My scores are fine. Not perfect, but fine. They recently took a hit because I opened a few new cards, but they'll be back soon enough.

I think the important thing here, above all else is pay your bills on time, and wait it out.
Thank you for the reply. I have four credit cards so far and I already feel confused about when to pay their balances and how much to pay to keep their utilization low. At least I can set-up auto paying of minimum balances as a safety net in case I forget to pay accidentaly. But still, it's time consuming to keep balances low for reporting. So I understand why you've chosen to do it the way you descibed.
I think a good compromise is to practice AZEO a month or two before applying for credit, and to just pay off balances when they're due the rest of the time. This minimizes the nuisance of managing balances all the time, while ensuring scores are in peak shape when it matters. When credit limits that are high enough to keep utilization at reasonable levels, scores typically won't swing more than 15 or 20 points. And if the underlying scores are decent, that's not enough to worry about even if there's an unexpected pull like an account review.

Though I'm not sure how that interacts with the new trending models. Both FICO 10T and VantageScore 4.0 will be rising to prominence as Fanny Mae moves toward using them in mortgages.

Thanks, that makes sense. I think that I personally won't be able to monitor my cards and balances all the time to make them perfect AZEO. I might try AZEO to see what happens to my score but at the end I'll probably employ a model similiar to yours and use strict AZEO only when I need the scores to be top notch before applying for credit.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Mon, 07 Aug 2023 15:08:52 GMT

@Horseshoez wrote:
In my case, per my signature, I refused to micromanage my finances and as such, I refuse to employ AZEO. Instead, I pay my cards in full prior to the statement reporting date and let the chips fall where they may; most months a small "pending" charge or two will trickle through between my payment and the cut of the statement and for those months I end up AZEO or AZE2 (and twice now AZE3); I have yet to see even a single point loss from three cards reporting a small balance (i.e. less than $100). That said, three or four times now I've ended up All Zero, and that does result in a point loss of 15-20 points each time it happens; the good news, as most of you know, said point loss is transient and my scores always recover the next month I have a card or two reporting a balance.

Thanks for the reply and for giving me more thoughts to consider. It's true, this financial micromanagement is just another headache to deal with in a life that's already very busy. I'll definitely try AZEO to see how it impacts my score, as I'm trying to grow the score fast and as I'm familiarizing myself with how the credit scoring works. But as I know myself, I most likely won't be able to do AZEO all the time in the future. Maybe just a month/two before applying for some major credit such as a mortgage. I'll probably lose my drive for AZEO once I don't see a need for a new credit in the future. At that point, I would probably aim to make as low balance on each card as possible, to keep the utilization low and allow the score to evolve more naturally.

Re: Can I pay my credit card balances in full and still build a credit score?

Thomas_Thumb — Tue, 08 Aug 2023 14:57:35 GMT

@rokobu wrote:
@CreditCobra wrote:
I used to go through the process of trying to figure out when to pay off which cards and such, but I finally just gave up. I don't even pay much attention to when the statements cut on my various cards anymore. Some accounts have a only an item or two that bill to each card once a month, I simply pay those cards off a few days later. Everything else I just pay off every Thursday. That's likely overkill for a lot of folks, but I sleep well at night with this. Sometimes the statement will cut with a small balance owing, but often it will cut at zero. My scores are fine. Not perfect, but fine. They recently took a hit because I opened a few new cards, but they'll be back soon enough.

I think the important thing here, above all else is pay your bills on time, and wait it out.
Thank you for the reply. I have four credit cards so far and I already feel confused about when to pay their balances and how much to pay to keep their utilization low. At least I can set-up auto paying of minimum balances as a safety net in case I forget to pay accidentaly. But still, it's time consuming to keep balances low for reporting. So I understand why you've chosen to do it the way you descibed.

There is no need to keep balances low nor any real value in AZEO for credit building. The primary benefit of AZEO is to maximize point in time credit score.

Building credit comes from on time payment history over time and showing ability to handle multiple types of credit. Just avoid derogatories. No need to report AZEO every month.

Auto pay of minimum balance before due date is good for avoiding lates. However, best to set-up auto pay of full statement balance before due date to avoid interest fees. You can manually choose to pay card charges before statements cut if necessary.

I just pay statement balances in full every month. Sometimes balances were small, other times quite large - but always PIF. A large balance (high utilization) can drop score until payment reports but the PIF is viewed positively as part of credit history.

Re: Can I pay my credit card balances in full and still build a credit score?

Horseshoez — Tue, 08 Aug 2023 15:13:40 GMT

Just to be clear, a large mid-cycle balance will not impact one's credit score at all; consider the following:

Card X has a credit limit of $10,000, a monthly due date on the 10th of each month, and a statement cut date 13th of each month
Card X gets a payment for all outstanding charges on the 12th
Card X then racks up $9,200 worth of new charges in the current month
Card X then receives a payment for all new charges, once again on the 12th

The above scenario will simply report to the credit bureaus a balance of $0.00 for both months; the high mid-cycle balance is irrelevant from a credit scoring perspective.

Re: Can I pay my credit card balances in full and still build a credit score?

rokobu — Wed, 09 Aug 2023 21:53:33 GMT

@Thomas_Thumb wrote:
@rokobu wrote:
@CreditCobra wrote:
I used to go through the process of trying to figure out when to pay off which cards and such, but I finally just gave up. I don't even pay much attention to when the statements cut on my various cards anymore. Some accounts have a only an item or two that bill to each card once a month, I simply pay those cards off a few days later. Everything else I just pay off every Thursday. That's likely overkill for a lot of folks, but I sleep well at night with this. Sometimes the statement will cut with a small balance owing, but often it will cut at zero. My scores are fine. Not perfect, but fine. They recently took a hit because I opened a few new cards, but they'll be back soon enough.

I think the important thing here, above all else is pay your bills on time, and wait it out.
Thank you for the reply. I have four credit cards so far and I already feel confused about when to pay their balances and how much to pay to keep their utilization low. At least I can set-up auto paying of minimum balances as a safety net in case I forget to pay accidentaly. But still, it's time consuming to keep balances low for reporting. So I understand why you've chosen to do it the way you descibed.
There is no need to keep balances low nor any real value in AZEO for credit building. The primary benefit of AZEO is to maximize point in time credit score.

Building credit comes from on time payment history over time and showing ability to handle multiple types of credit. Just avoid derogatories. No need to report AZEO every month.

Auto pay of minimum balance before due date is good for avoiding lates. However, best to set-up auto pay of full statement balance before due date to avoid interest fees. You can manually choose to pay card charges before statements cut if necessary.

I just pay statement balances in full every month. Sometimes balances were small, other times quite large - but always PIF. A large balance (high utilization) can drop score until payment reports but the PIF is viewed positively as part of credit history.

Wow, I love your credit scores! Thank you for the reply and insights. This is great to know. Yes indeed, I always pay full statement balances before due date to avoid interest fees. I've set-up the auto-pay of minimum balances just to be 100% sure that I don't ever miss the payment - but I keep an eye on the accounts from time to time anyway to make sure that I keep the utilization low. So now I know that I don't do wrong with my actions in terms of building my score.