topic Re: What does carrying a balance really mean? in Understanding FICO® Scoring

What does carrying a balance really mean?

Anonymous — Fri, 22 Feb 2013 01:52:54 GMT

After checking my TU score I see the only "ding" on the report is for too having too many credit cards with balances. In fact it advises "What to do about this: You should consider reducing the number of your
accounts that carry a balance and keeping your balances low."

In my entire credit history life, I've always paid off every card completely in full every month on time. So what does keeping a balance really mean? I pay off my cards on the same day of every month, a few days before the due date and always have.

So,

What exactly is carrying a balance? I always thought it meant carrying debt past the payment due date, but I'm obviously wrong on this
What is an optimum number of credit cards to use each month? I have more cards than I need (I've opened up two cards for a discount at a store not realizing that I was hurting my credit scores short term), but I don't use many of them I just don't want to close anything for fear of lowering my score/credit history. Keep in mind I was taught at a very young age to avoid debt at all costs, so I've never even been slightly tempted to live above my means so having extra cards is not a temptation for me fortunately.
Is there a better time to pay off credit cards, like once a week maybe? Then would I not be carrying a balance?

Just wondering how to optimize my scores, my TU score was 792 btw, so its not bad BUT I wanted it to be over 800 (which it was 2 years ago when I checked so I guess this balance thing knocked me off my pedestal LOL).

Re: What does carrying a balance really mean?

Anonymous — Fri, 22 Feb 2013 01:51:40 GMT

Also I should add, I'm checking my scores now because I plan to start looking into buying a home in about a year, so if there are any things I can do over the next 12 months to really optimize my scores I would like to implement them now.

Re: What does carrying a balance really mean?

RobertEG — Fri, 22 Feb 2013 16:56:06 GMT

While apparently not a highly-weighted sub-category of scoring of util of credit, FICO looks at the % of cards carrying a balance when reported, meaning anything more than $0. They apparently consider that to be some indication of the creditor's reliance on discretionary debt to meet monthly obligations.

Five cards with three reporting any balance would thus be 60% with balance.

With only one card, the consumer will always be at 0 or 100%, with two cards, either 0, 50, or 100%, three cards, 0, 33, 67. or 100%, and so on.

Thus, the number of revolving can help in scoring of this relatively minor sub-category.

Re: What does carrying a balance really mean?

p- — Fri, 22 Feb 2013 17:08:00 GMT

Regarding Utilization, I personally have had the best results when only one card shows a balance, and that balance is less than 5% of my total available credit.

Distantarray recently posted a graph made by Bobwang from Creditboards in this thread and it shows the utilization effect on different credit profiles. Very useful information.

Re: What does carrying a balance really mean?

Quips — Fri, 22 Feb 2013 19:54:49 GMT

@Anonymous wrote:
After checking my TU score I see the only "ding" on the report is for too having too many credit cards with balances. In fact it advises "What to do about this: You should consider reducing the number of your
accounts that carry a balance and keeping your balances low."

In my entire credit history life, I've always paid off every card completely in full every month on time. So what does keeping a balance really mean? I pay off my cards on the same day of every month, a few days before the due date and always have.

So,
What exactly is carrying a balance? I always thought it meant carrying debt past the payment due date, but I'm obviously wrong on this
What is an optimum number of credit cards to use each month? I have more cards than I need (I've opened up two cards for a discount at a store not realizing that I was hurting my credit scores short term), but I don't use many of them I just don't want to close anything for fear of lowering my score/credit history. Keep in mind I was taught at a very young age to avoid debt at all costs, so I've never even been slightly tempted to live above my means so having extra cards is not a temptation for me fortunately.
Is there a better time to pay off credit cards, like once a week maybe? Then would I not be carrying a balance?
Just wondering how to optimize my scores, my TU score was 792 btw, so its not bad BUT I wanted it to be over 800 (which it was 2 years ago when I checked so I guess this balance thing knocked me off my pedestal LOL).

1) Carrying a balance means that the credit card had a balance at the statement end date that was reported to the CRA's. If you want to avoid having a balance show, pay the card down to $0 by the statement ending date so a $0 balance will be reported.

2) Doesn't matter how many you have or how many you use - the only facts that matter for FICO scoring is the number of cards that report a balance. In my experience, FICO dings your score when 50% or more of your cards carry a balance. I have around 11 cards and I use almost all of them depending on the rewards offered, but I always try to make sure no more than 5 carry a balance. I always pay the balances in full unless it is a 0.0% interest rate. I keep my total Utilization around 15-20% unless I am planning on applying for credit, then I work it down to under 10% for maximum FICO scoring.

Re: What does carrying a balance really mean?

Anonymous — Sat, 23 Feb 2013 01:20:06 GMT

Ok thanks for all the replies everyone!