topic Re: credit balance in Understanding FICO® Scoring

credit balance

hpertrain — Mon, 06 Aug 2007 03:54:50 GMT

I kkep seeing posts that say keep at least a $5.00 balance on your revolving credit

card accounts versus a 0 balance. I'm in the habit of paying my credit card balance down to

0 after using one each month. Am I missing something? Should I pay the entire balance off

except for $5.00,will that increase my score?

Re: credit balance

Anonymous — Mon, 06 Aug 2007 04:17:16 GMT

@hpertrain wrote:
I kkep seeing posts that say keep at least a $5.00 balance on your revolving credit
card accounts versus a 0 balance. I'm in the habit of paying my credit card balance down to 0 after using one each month. Am I missing something? Should I pay the entire balance off except for $5.00,will that increase my score?

You always want to pay the entire balance off (if you can) before the due date, in order to avoid finance charges. What everyone is referring to is the balance at the time the statement closes. The statement balance is what reports to the CRAs and appears on your CR. You don't want to pay your entire balance before the statement closes, if you are trying to maximize your score.

If you intend to pay in full each month, and have a reason to maximize your FICO scores (such as preparing to apply for a mortgage or auto loan):

If your balance is less than 10% of your credit limit just before the statement closes, let that balance post and then pay it in full before the due date.

If your balance is 10% of your credit limit or more, try to pay part of it before your statement closes, so the statement balance is less than 10%, and then pay the rest before the due date.

If you don't have a reason to maximize your FICO scores at the moment, it really doesn't matter if you pay in full before the statement closing date.

Re: credit balance

Anonymous — Mon, 06 Aug 2007 04:27:15 GMT

If you have six credit card accounts, is it best to show a small balances on all six, or just a small balance on 2 of them?

Re: credit balance

Anonymous — Tue, 07 Aug 2007 15:51:40 GMT

Can anyone tell me if:

CC1 $10

CC2 $10

CC3 $0

CC4 $0

CC5 $0

CC6 $0

Is better then:

CC1 $10

CC2 $10

CC3 $10

CC4 $10

CC5 $10

CC6 $10

Re: credit balance

fused — Tue, 07 Aug 2007 22:28:39 GMT

section8 wrote:

Can anyone tell me if:

CC1 $10

CC2 $10

CC3 $0

CC4 $0

CC5 $0

CC6 $0

Is better then:

CC1 $10

CC2 $10

CC3 $10

CC4 $10

CC5 $10

CC6 $10

?

the second one is better. 1-9% util on all for max fico points.

Re: credit balance

Anonymous — Tue, 07 Aug 2007 23:47:32 GMT

Thanks, that is good to know. I was thinking the first example would give a better score, because 2 cards is supposed to be optimal, so I was thinking 2 balances would be best.

Re: credit balance

smallfry — Wed, 08 Aug 2007 01:00:36 GMT

@fused111 wrote:

@Anonymous wrote:
Can anyone tell me if:
CC1 $10
CC2 $10
CC3 $0
CC4 $0
CC5 $0
CC6 $0
Is better then:
CC1 $10
CC2 $10
CC3 $10
CC4 $10
CC5 $10
CC6 $10
?

the second one is better. 1-9% util on all for max fico points.

I don't agree. Too many accounts with balances. Leave no more than 4 accounts showing a balance including mortgages, car loans and credit cards.

Re: credit balance

Anonymous — Wed, 08 Aug 2007 01:08:17 GMT

Well, that brings me back to #1, since I have other accounts. I wish we could find out for sure...

Re: credit balance

smallfry — Wed, 08 Aug 2007 01:55:55 GMT

@Anonymous wrote:
Well, that brings me back to #1, since I have other accounts. I wish we could find out for sure...

Every FICO report I have pulled likes under 5 accounts reporting. Three is best. You can get away with four. Try it YMMV.

Re: credit balance

Anonymous — Wed, 08 Aug 2007 05:13:34 GMT

Hi,

Just wondering...

Say I have a credit limit of $8,000 on a credit card, and I have a current balance of $7,000. My debt ratio would be 87.5%, right? But, if I have other credit cards that aren't in use, and all together my credit lines equal say $50,000 my debt ratio wouldn't be so bad. This won't hurt my credit score, right? They look at your entire credit line, not just one particular card, right?

Thanks!

Steve

Re: credit balance

fused — Wed, 08 Aug 2007 05:57:30 GMT

@smallfry wrote:

@fused111 wrote:

@Anonymous wrote:

Can anyone tell me if:

CC1 $10

CC2 $10

CC3 $0

CC4 $0

CC5 $0

CC6 $0

Is better then:

CC1 $10

CC2 $10

CC3 $10

CC4 $10

CC5 $10

CC6 $10

?

the second one is better. 1-9% util on all for max fico points.

I don't agree. Too many accounts with balances. Leave no more than 4 accounts showing a balance including mortgages, car loans and credit cards.

It does not matter how many open CC accounts you have as long as you pay on time and keep your util very low (1-9% util). Same goes for installment loans: mortgages, autos, student loans and unsecured/secured loans it's all about paying on time, forget about the outstanding balances, it's about making timely payments.

Message Edited by fused111 on 08-07-2007 07:57 PM

Re: credit balance

smallfry — Wed, 08 Aug 2007 10:04:09 GMT

@fused111 wrote:

@smallfry wrote:

@fused111 wrote:

@Anonymous wrote:
Can anyone tell me if:
CC1 $10
CC2 $10
CC3 $0
CC4 $0
CC5 $0
CC6 $0
Is better then:
CC1 $10
CC2 $10
CC3 $10
CC4 $10
CC5 $10
CC6 $10
?

the second one is better. 1-9% util on all for max fico points.

I don't agree. Too many accounts with balances. Leave no more than 4 accounts showing a balance including mortgages, car loans and credit cards.
It does not matter how many open CC accounts you have as long as you pay on time and keep your util very low (1-9% util). Same goes for installment loans: mortgages, autos, student loans and unsecured/secured loans it's all about paying on time, forget about the outstanding balances, it's about making timely payments.

Message Edited by fused111 on 08-07-2007 07:57 PM

It absolutely does matter how many accounts you have balances open with. A page out of the FICO handbook. FICO high achievers have an average of 3 accounts reporting balances. If you have high scores your way have at it. Rather than do it that way each month why not try paying it down to 0 one time and see if you notice any difference. You telling me that CW's with 25 cards won't see their score suffer if they left a $20 balance to report on all their cards? Check the scoring manual and you'll find 3 is optimum.

Re: credit balance

smallfry — Wed, 08 Aug 2007 10:05:10 GMT

@Anonymous wrote:
Hi,
Just wondering...
Say I have a credit limit of $8,000 on a credit card, and I have a current balance of $7,000. My debt ratio would be 87.5%, right? But, if I have other credit cards that aren't in use, and all together my credit lines equal say $50,000 my debt ratio wouldn't be so bad. This won't hurt my credit score, right? They look at your entire credit line, not just one particular card, right?
Thanks!
Steve

Yes it will. Each tradeline is scored by itself and as part of the whole. Keep it under 10% for optimum scoring potential.

Re: credit balance

fused — Wed, 08 Aug 2007 18:35:14 GMT

@smallfry wrote:

@fused111 wrote:

@smallfry wrote:

@fused111 wrote:

@Anonymous wrote:

Can anyone tell me if:

CC1 $10

CC2 $10

CC3 $0

CC4 $0

CC5 $0

CC6 $0

Is better then:

CC1 $10

CC2 $10

CC3 $10

CC4 $10

CC5 $10

CC6 $10

?

the second one is better. 1-9% util on all for max fico points.

I don't agree. Too many accounts with balances. Leave no more than 4 accounts showing a balance including mortgages, car loans and credit cards.

It does not matter how many open CC accounts you have as long as you pay on time and keep your util very low (1-9% util). Same goes for installment loans: mortgages, autos, student loans and unsecured/secured loans it's all about paying on time, forget about the outstanding balances, it's about making timely payments.

Message Edited by fused111 on 08-07-2007 07:57 PM

It absolutely does matter how many accounts you have balances open with. A page out of the FICO handbook. FICO high achievers have an average of 3 accounts reporting balances. If you have high scores your way have at it. Rather than do it that way each month why not try paying it down to 0 one time and see if you notice any difference. You telling me that CW's with 25 cards won't see their score suffer if they left a $20 balance to report on all their cards? Check the scoring manual and you'll find 3 is optimum.

Well it's a stalemate then! You say it does matter and I say it doesn't. I use to PIF all of my CCs with no ill effect. Now I have 6 open CC's and all of them are reporting about 4-6% util and my scores improved some. In fact two of them are in the 755-792 range. I think the point of all of this is max fico points. For some members a few extra points earns them a better mortgage rate or an approval for a CC or some other loan. If your not planning on applying for credit in the near future, then I think like you, PIF.

Re: credit balance

Anonymous — Thu, 09 Aug 2007 01:01:57 GMT

@smallfry wrote:
@Anonymous wrote:
Well, that brings me back to #1, since I have other accounts. I wish we could find out for sure...
Every FICO report I have pulled likes under 5 accounts reporting. Three is best. You can get away with four. Try it YMMV.

Correct. I tried it. Lost 18 points for too many cards with balances. FICO through EQ. I put a silly little balance on a card to get it to report and score went down 18 points. I paid it off and score went up 18 points. Well at least my credit report works that way. Also confirmed at BankRate.com with the FICO simulator. It might not be accurate but still some things on there I have tested to be true with my credit reports and scores.

I still charge activity on "all" cards when I am not checking my score because that is the only way to keep activity going for most points. I just limit to 4 or less when I want some extra points to apply for something.

Message Edited by ilovepizza on 08-08-2007 06:01 PM

Re: credit balance

Anonymous — Thu, 09 Aug 2007 00:46:24 GMT

@Anonymous wrote:
Hi,
Just wondering...
Say I have a credit limit of $8,000 on a credit card, and I have a current balance of $7,000. My debt ratio would be 87.5%, right? But, if I have other credit cards that aren't in use, and all together my credit lines equal say $50,000 my debt ratio wouldn't be so bad. This won't hurt my credit score, right? They look at your entire credit line, not just one particular card, right?
Thanks!
Steve

Not sure here on this one at 87%. I know once you hit 90% on any single card it is considered maxed and that can hurt more. I don't know if there is any difference between 1 card at 87% vs splitting it between 3-4 cards.

Re: credit balance

fused — Thu, 09 Aug 2007 01:03:19 GMT

Tusc, Barry care to chime in!

Re: credit balance

Anonymous — Thu, 09 Aug 2007 02:23:15 GMT

I need 3 more points on my TU FICO and my statement date is coming up. I wish I knew if I should keep $31 as the balance or pay it off...

Re: credit balance

Anonymous — Thu, 09 Aug 2007 23:11:26 GMT

Well I paid it all. Lets see what happens...

Re: credit balance

smallfry — Fri, 10 Aug 2007 01:26:12 GMT

Fused tell you what. Let every tradeline you have report a balance and pull a report and see if you don't get the too many accounts with balances is hurting your score message.