topic Re: First time CC reported a balance in General Credit Topics

First time CC reported a balance

Anonymous — Fri, 26 Jun 2015 18:19:51 GMT

I was told to always pay every credit card in full every month if I could as it would help my credit. So I have done, every month.

But this month I let two of my cards report a small balance as I honestly just forgot to pay it all.

Both cards reported roughly $50.

My EX jumped up 18 points and the others roughly 10!

Does anyone know why this happens? Should I be doing this every month?

Very happy

Re: First time CC reported a balance

Anonymous — Sat, 27 Jun 2015 00:57:46 GMT

There are two concepts at play here. One is "paying a CC in full" (often abbreviated PIF) and the other is a CC reporting a zero balance . In your post, it sounds like you are thinking they are the same thing, They aren't.

What happens is that, at the end of every billing cycle, a CC generates a statement which says how much money you owe -- which will be the current balance on that date. That balance is typically (but not always -- it varies by CC) reported to the three CRAs the next day. You then have about 25 days before that amount is due. (Again the exact due date varies by CC.)

To "pay in full" is usually understood to mean paying in full that positive balance reported on the statement and doing so after the statement cuts but before the due date.

To take an example, suppose you have four credit cards, and that you use all four modestly every month. Suppose also that you are paying them in full. That means that all four are reporting a balance to the three CRAs.

I am guessing that what you have been doing is paying your CCs down to zero every month BEFORE the statement cuts, so that each CC was always reporting $0 to the CRAs. You did so because someone told you that this was the right thing to do to help your score. They were mistaken, though it's not a big deal. FICO and other scoring algorithms like seeing that you are reporting a positive balance on at least one card. Reporting $0 on all your cards lost you some points.

In the future, just always PIF (after the statement cuts) and if you really need to get extra points before a major credit pull, make sure all revolving lines report $0 with one line reporting a positive balance < than 9% of that card's credit limit.

Re: First time CC reported a balance

Anonymous — Sat, 27 Jun 2015 01:19:55 GMT

Thank you so much!

I have been obsessed over my credit scores for about 6 months now and not once did I read this anywhere. I think this is what has been partially hindering my scores from moving around a lot recently. And yes someone did tell me to pay before the due date *sigh*

It makes so much sense now though. Of course they want to see that you're paying down balances etc.

Embarrassed that it has taken me this long to find this out.

Re: First time CC reported a balance

Anonymous — Sat, 27 Jun 2015 01:38:52 GMT

@Anonymous wrote:
Thank you so much!
I have been obsessed over my credit scores for about 6 months now and not once did I read this anywhere. I think this is what has been partially hindering my scores from moving around a lot recently. And yes someone did tell me to pay before the due date *sigh*
It makes so much sense now though. Of course they want to see that you're paying down balances etc.
Embarrassed that it has taken me this long to find this out.

You are very welcome! Just so I am 100% clear, to PIF does indeed mean paying the full amount (on the statement) before the due date. The key idea with PIF is that you pay that amount AFTER the statement cuts. Thus, when you PIF, the amount gets reported to the CRA but you are still paying that amount in full before it is due.

All this is to be distinguished from "carrying a balance" (different from reporting a balance to the CRAs and different also from paying in full). Carrying a balance means that you do not pay the amount you owe in full, but rather just part of it. (You still make this partial payment before the due date.) The remainder gets "carried over" onto the next statement and you have to pay interest on it.

PIF-ing is much better. It forces you to live within your means and not run up lots of credit card debt. It frees you from paying even a penny of interest to the credit card companies. And it makes FICO like you by showing that you are using cards. It's a triple good thing.

Re: First time CC reported a balance

Anonymous — Sat, 27 Jun 2015 02:26:44 GMT

@Anonymous wrote:
@Anonymous wrote:
Thank you so much!
I have been obsessed over my credit scores for about 6 months now and not once did I read this anywhere. I think this is what has been partially hindering my scores from moving around a lot recently. And yes someone did tell me to pay before the due date *sigh*
It makes so much sense now though. Of course they want to see that you're paying down balances etc.
Embarrassed that it has taken me this long to find this out.
You are very welcome! Just so I am 100% clear, to PIF does indeed mean paying the full amount (on the statement) before the due date. The key idea with PIF is that you pay that amount AFTER the statement cuts. Thus, when you PIF, the amount gets reported to the CRA but you are still paying that amount in full before it is due.

All this is to be distinguished from "carrying a balance" (different from reporting a balance to the CRAs and different also from paying in full). Carrying a balance means that you do not pay the amount you owe in full, but rather just part of it. (You still make this partial payment before the due date.) The remainder gets "carried over" onto the next statement and you have to pay interest on it.

PIF-ing is much better. It forces you to live within your means and not run up lots of credit card debt. It frees you from paying even a penny of interest to the credit card companies. And it makes FICO like you by showing that you are using cards. It's a triple good thing.

I am pretty sure I understand now. But here is a question: Say if Chase reports $50. I pay the $50 after it reports, and next cycle it also reports $50 as I want it to report something. Do they see the fact that I have paid my credit card or do they just see X amount?

Re: First time CC reported a balance

Anonymous — Sat, 27 Jun 2015 06:30:35 GMT

That's a great question, buddy!

For many years, all that the CRA databases recorded (as far as your credit card balances and payments) is what your most recent balance was and whether you were "paying as agreed" -- i.e. for a typical credit card, had you made at least the "minimum" payment. If you had missed payments in the past, or if you had been late, they would capture this kind of negative infomation in painful historical detail. But if there was nothing negative, then the details of your positive payment history were erased after each month, e.g. exactly how much did you owe on your Amex six months ago and of that bill how much did you pay?

That was until a few years ago. TransUnion started recording for credit cards the exact amount that you were billed each month, and of that month's bill how much you paid, not for many years of history but certainly for many months Prior to that FICO could never have asked in their models the question: does this guy PIF each month or does he sometimes pay less and carry a balance? The CRAs simply didn't provide enough data for a credit scoring algorithm to distinguish between the two.

I am pretty sure that FICO does not do that in any of their models, not even the latest FICO 9. But that doesn't mean that they won't in the future. In fact, I personally think it is likely that they will, now that CRAs have started capturing it, since people who carry balances have been shown to be a good deal riskier as a whole than those that PIF. Just another reason I personally think it is good to get in the habit of PIF-ing.

Re: First time CC reported a balance

Revelate — Sat, 27 Jun 2015 16:34:11 GMT

@Anonymous wrote:
That's a great question, buddy!

For many years, all that the CRA databases recorded (as far as your credit card balances and payments) is what your most recent balance was and whether you were "paying as agreed" -- i.e. for a typical credit card, had you made at least the "minimum" payment. If you had missed payments in the past, or if you had been late, they would capture this kind of negative infomation in painful historical detail. But if there was nothing negative, then the details of your positive payment history were erased after each month, e.g. exactly how much did you owe on your Amex six months ago and of that bill how much did you pay?

That was until a few years ago. TransUnion started recording for credit cards the exact amount that you were billed each month, and of that month's bill how much you paid, not for many years of history but certainly for many months Prior to that FICO could never have asked in their models the question: does this guy PIF each month or does he sometimes pay less and carry a balance? The CRAs simply didn't provide enough data for a credit scoring algorithm to distinguish between the two.

I am pretty sure that FICO does not do that in any of their models, not even the latest FICO 9. But that doesn't mean that they won't in the future. In fact, I personally think it is likely that they will, now that CRAs have started capturing it, since people who carry balances have been shown to be a good deal riskier as a whole than those that PIF. Just another reason I personally think it is good to get in the habit of PIF-ing.

Experian > TU > EQ looking at my old reports in terms of rollout of reported payments from a trivia perspective.

FICO is blind to the payments currently, and not all lenders report it (Amex notably does not). As a result doesn't effect score, but if it's on the report it can be used by an individual lender to make a decision. I hope in the future that all lenders do report it, and that FICO makes use of it, as the $0 all balances penalty is pretty lame when looked at rationally from a consumer perspective as indicative that they aren't using their cards at all.

@Anonymous: Having $50 report every time is fine though unless you're stressing about it it's hard to make a file report identically a single balance each time if you're using the cards normally and really not worth it. The one caveat I would suggest, use some other card than one of your Chase ones for reporting a balance... Chase has a recent policy where if you pay off your balance to $0, they do a mid-cycle report flatlining that card's balance. It's a small gotcha if you aren't applying for anything, but it's something to be aware of if we're talking FICO maximization at instant-in-time for just what you found earlier, might have all your cards reporting $0 which is a non-trivial penalty.

Re: First time CC reported a balance

Anonymous — Sun, 28 Jun 2015 05:26:02 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
Thank you so much!
I have been obsessed over my credit scores for about 6 months now and not once did I read this anywhere. I think this is what has been partially hindering my scores from moving around a lot recently. And yes someone did tell me to pay before the due date *sigh*
It makes so much sense now though. Of course they want to see that you're paying down balances etc.
Embarrassed that it has taken me this long to find this out.
You are very welcome! Just so I am 100% clear, to PIF does indeed mean paying the full amount (on the statement) before the due date. The key idea with PIF is that you pay that amount AFTER the statement cuts. Thus, when you PIF, the amount gets reported to the CRA but you are still paying that amount in full before it is due.

All this is to be distinguished from "carrying a balance" (different from reporting a balance to the CRAs and different also from paying in full). Carrying a balance means that you do not pay the amount you owe in full, but rather just part of it. (You still make this partial payment before the due date.) The remainder gets "carried over" onto the next statement and you have to pay interest on it.

PIF-ing is much better. It forces you to live within your means and not run up lots of credit card debt. It frees you from paying even a penny of interest to the credit card companies. And it makes FICO like you by showing that you are using cards. It's a triple good thing.
I am pretty sure I understand now. But here is a question: Say if Chase reports $50. I pay the $50 after it reports, and next cycle it also reports $50 as I want it to report something. Do they see the fact that I have paid my credit card or do they just see X amount?

Be careful if you want your Chase card to report a balance because they have mid-cycle reporting.

http://ficoforums.myfico.com/t5/Credit-Cards/Chase-Mid-Cycle-Reporting/td-p/4042168

So your balance might reported temporarily but once you pay it off it gets wiped from your credit report from my understanding.

Re: First time CC reported a balance

Anonymous — Sun, 28 Jun 2015 16:58:25 GMT

Don't worry, anything related to balance levels has no lasting effect on your score. There is no credit score "memory" of what your balance was last month. If you improve your utilization next month score will bounce right back immediately.

The only thing that matters long term is whether you made your payment online or whether you were late paying the minimum.

Re: First time CC reported a balance

Anonymous — Sun, 28 Jun 2015 18:05:28 GMT

Hey Canadian... I am guessing you made a typo in your advice to the OP. You told him that the only thing that mattered was whether he made his payment online. I am almost sure you meant on time. Is that right?

PS. I am personally the worst typist ever -- I am the "chief of sinners" here.

Re: First time CC reported a balance

takeshi74 — Mon, 29 Jun 2015 12:42:57 GMT

@Anonymous wrote:
My EX jumped up 18 points and the others roughly 10!
Does anyone know why this happens?

In addiion to the above it seems like you're assuming causality here. There are certainly other potential changes to your reports that could have impacted scoring as well but we don't have access to the details of your reports. With any scoring change you have to carefully review reports from before and after the change to determine the cause. What specific scoring model are you referring to?

@Anonymous wrote:
It makes so much sense now though. Of course they want to see that you're paying down balances etc.

It's really your reported utilization and number of balances that matter. The general advice is do not exceed 30% -- both individual and overall. However, ideal is much lower. Lower is generally better as long as you don't have all 0 balances reporting. To optimize -- i.e. when applying for credit and looking to eke out every possible point -- allow only one balace to report at 10% or less.

@Anonymous wrote:
I have been obsessed over my credit scores for about 6 months now and not once did I read this anywhere.

It's commonly discussed here. I know I post about the difference between reporting and carrying and report versus due date quite a bit here.

As far as payments are dates are concerned:

Pay at least the minimum due by the due date to keep your account current.
Pay the statement balance in full by the due date to avoid incurring interest and debt.
Pay by the report date (statement date for most cards) to reduce the reported balance. If not paid to a 0 balance to allow a balance to reprot then pay the remainder of the statement balance in full by the due date.

@Anonymous wrote:
I am pretty sure I understand now. But here is a question: Say if Chase reports $50. I pay the $50 after it reports, and next cycle it also reports $50 as I want it to report something. Do they see the fact that I have paid my credit card or do they just see X amount?

They see the same info that you see on your reports. They see the limit, the reported balance, payment amount in some cases, high balance and payment history.