topic Re: Credit Card Balances in General Credit Topics

Credit Card Balances

jmonye21 — Mon, 20 May 2024 20:24:09 GMT

Hello, all

I have a few credit cards totaling a $3K limit. Some say to keep a small balance on them, others say pay in full. I purchased something for $2 on one card and my TU went down 2 points and EX went down 3. 😑 The balance on the card was literally $2.17, while all other balances are low and on time.

Any suggestions? I paid the $2.17 by the way.

Re: Credit Card Balances

JoeRockhead — Mon, 20 May 2024 20:37:09 GMT

Sounds like you were just penalized for "having too many accounts with balances". Silly I know, but it's a thing. The good news is utilization has no memory so, it's an easy fix. For the up coming billing cycle pay everything to zero except one card, and allow it to report only a small balance and see what that does for your scores.

ETA: what are your balances/limits on each of the cards?

Re: Credit Card Balances

SouthJamaica — Mon, 20 May 2024 21:02:03 GMT

@jmonye21 wrote:
Hello, all
I have a few credit cards totaling a $3K limit. Some say to keep a small balance on them, others say pay in full. I purchased something for $2 on one card and my TU went down 2 points and EX went down 3. 😑 The balance on the card was literally $2.17, while all other balances are low and on time.

Any suggestions? I paid the $2.17 by the way.

1. Always pay in full.

2. Let one card report a balance each month before you pay it off; let the others report zero (i.e., pay the others before the reporting date, which is usually the statement date).

Re: Credit Card Balances

jmonye21 — Mon, 20 May 2024 21:25:24 GMT

Great idea- I'm going to try that.

I have:

$98 balance/$1K limkt

$3 balance/ $800 limit

$12 balance/ $450 limit

$8.25 balance/ $400 limit.

$0 balance (paid the $2)/ $300 limit

Re: Credit Card Balances

CreditPoor — Mon, 20 May 2024 22:35:13 GMT

Definitely too many balances reporting. I would reduce all but one to zero and let that report. The thinner your file the more sensitive to balances it is.

Re: Credit Card Balances

jmonye21 — Mon, 20 May 2024 22:37:12 GMT

Credit Card Balances

Great idea- I'm going to try that.

I have:

$98 balance/$1K limkt

$3 balance/ $800 limit

$12 balance/ $450 limit

$8.25 balance/ $400 limit.

$0 balance (paid the $2)/ $300 limit

Re: Credit Card Balances

jmonye21 — Mon, 20 May 2024 22:43:24 GMT

Thanks! Will try that.

Re: Credit Card Balances

SouthJamaica — Tue, 21 May 2024 04:03:15 GMT

@jmonye21 wrote:
Thanks! Will try that.

You should have mostly zero balances reporting.

Re: Credit Card Balances

jmonye21 — Tue, 21 May 2024 04:14:08 GMT

Gotcha. Gets confusing with some saying to leave a small balance. Guess I had too many.

Re: Credit Card Balances

Snook_on_the_Line — Tue, 21 May 2024 13:29:07 GMT

@jmonye21 wrote:
Gotcha. Gets confusing with some saying to leave a small balance. Guess I had too many.

The metric you are trying to optimize with AZEO is % of accounts with balances

your looking a low percentage of your accounts, but not 0

For score improvement purposes one card reporting a small balance on statement day is ideal. just pay it in full before the due date to avoid interest charges.

I hear from people IRL all the time say you need to carry a small balance month to month while paying more than the minimum to improve your scores

This is wrong.

I feel like this is disinformation spread by cc companies to earn more on interest.

I've never carried a balance (and as such have never paid any interest)

and my scores are up 265+ points over the last 2.5 years (505-772)

Re: Credit Card Balances

jmonye21 — Tue, 21 May 2024 15:29:40 GMT

Great. Thanks! I had to Google AZEO. Never heard of it. Also, I thought statement date and due date were the same thing. I'm a bit confused.

Re: Credit Card Balances

jmonye21 — Tue, 21 May 2024 15:31:59 GMT

Actually just Googled the Statement date vs Due date, too.

Re: Credit Card Balances

Thomas_Thumb — Tue, 21 May 2024 21:25:21 GMT

Just to give some background info;

1. Fico looks at aggregate utilization in scoring. Keep this below 9% based on reported balances. For a margin of added safety stay below 5%. Charge cards are excluded from this calculation.

2. Fico looks at individual card utilizations and scores based on the card with the highest UT%

3. Fico looks at the number card of accounts with balances- including charge cards. **Fewer is better**

4. Fico looks for recent revolvong account activity. If there is NO activity on any revolving account, typical penalty is 20-25 points but ranges from 15-30 depending on profile. An account is considered inactive if reported balance is $0 even if used during the month.

Given the OP has 5 cards, my recommendation is either AZE2 or AZE1. Avoid the AZ penalty. The AZE2 penalty is typically 0-5 points for a 5 card profile. Avoid 4 of 5 and 5 of 5 reporting.

It is important to use all cards periodically to avoid closure due to non use. What is periodically? Atleast once every 3-5 months. The card issuer obviously knows the card was used even if paid to $0 before statement cut date.

Re: Credit Card Balances

jmonye21 — Fri, 24 May 2024 19:24:29 GMT

@Snook_on_the_Line @SouthJamaica @JoeRockhead @Thomas_Thumb

Another question. With regard to paying down to 0 during statement dates rather than due dates, I think it would be easier for me to just leave those accounts at 0. Would that help hurt my score to leave the 0 accounts at 0 and not use them to keep from mixing up the dates?

I have 5 cards and the dates begin to run together at times. I can keep a little balance on the one with the highest limit.

Re: Credit Card Balances

Thomas_Thumb — Fri, 24 May 2024 23:26:29 GMT

I would advise against carrying over a balance month to month. No need to incur interest charges. Better to make a progress payment before statement cuts and then pay the remainder by the due date.

It will hurt your score if those accounts are never used and then get closed due to inactivity. To avoid that possibility, each card should be used atleast once every 3-5 months.

I would recommend designating 1 card as your primary "daily driver". Then rotate use among the other cards one at a time.

The secondary card can be allowed to report a balance and paid before due date. This results in AZE2. Alternately, pay off the 2nd card before statement cuts which results in AZE1.

I have 5 cards and don't see a penalty reporting AZE2.

Re: Credit Card Balances

SouthJamaica — Fri, 24 May 2024 20:59:16 GMT

@jmonye21 wrote:
@Snook_on_the_Line @SouthJamaica @JoeRockhead @Thomas_Thumb
Another question. With regard to paying down to 0 during statement dates rather than due dates, I think it would be easier for me to just leave those accounts at 0. Would that help hurt my score to leave the 0 accounts at 0 and not use them to keep from mixing up the dates?

I have 5 cards and the dates begin to run together at times. I can keep a little balance on the one with the highest limit.

It doesn't affect your scores not to use the card during the cycle. It might, however, affect your relationship with the lender, as @Thomas_Thumb points out, if you go months without using it.

Re: Credit Card Balances

CaneVariant — Fri, 24 May 2024 22:27:11 GMT

@Thomas_Thumb wrote:
Just to give some background info;

1. Fico looks at aggregate utilization in scoring. Keep this below 9% based on reported balances. For a margin of added safety stay below 5%. Charge cards are excluded from this calculation.
2. Fico looks at individual card utilizations and scores based on the card with the highest UT%
3. Fico looks at the number card of accounts with balances- including charge cards. **Fewer is better**
4. Fico looks for recent revolvong account activity. If there is NO activity on any revolving account, typical penalty is 20-25 points but ranges from 15-30 depending on profile. An account is considered inactive if reported balance is $0 even if used during the month.

Given the OP has 5 cards, my recommendation is either AZE2 or AZE1. Avoid the AZ penalty. The AZE2 penalty is typically 0-5 points for a 5 card profile. Avoid 4 of 5 and 5 of 5 reporting.

It is important to use all cards periodically to avoid closure due to non use. What is periodically? Atleast once every 3-5 months. The card issuer obviously knows the card was used even if paid to $0 before statement cut date.

For a 2 card credit rebuild would it be embrace AZE1 or have both report as sub 5% utilization? With regards to Fico10T scoring (I believe this is considered trending) for a rebuild is it better to put every monthly expense (except rent) and then pay both down to sub 5% before the statement cuts? Organic spend is ~ $2k and would not put utilization at higher than 50% at any point ie $2k charges vs $4k limits. I ask because DP's seem to indicate both Ally and Mission Lane "reward" card "users" with better CLI's. Balances above 4% will not be carried. Thank you for your consideration. Cheers!

Re: Credit Card Balances

TrapLine — Sat, 25 May 2024 07:51:18 GMT

What the posters have offered works. Paid all accounts zero and then let a balance report and I gained 16 Fico 8 points on EX.

Now I will lose one to two inquiries from 2022 in June and anticipate this will further my snails pace climb back towards Fico 8 850.

Re: Credit Card Balances

Thomas_Thumb — Sat, 25 May 2024 01:41:44 GMT

@CaneVariant wrote:

For a 2 card credit rebuild would it be embrace AZE1 or have both report as sub 5% utilization? With regards to Fico10T scoring (I believe this is considered trending) for a rebuild is it better to put every monthly expense (except rent) and then pay both down to sub 5% before the statement cuts? Organic spend is ~ $2k and would not put utilization at higher than 50% at any point ie $2k charges vs $4k limits. I ask because DP's seem to indicate both Ally and Mission Lane "reward" card "users" with better CLI's. Balances above 4% will not be carried. Thank you for your consideration. Cheers!

For rebuilding credit it does not matter if one or both cards report balances. Both should be used. The key is developing a history of on-time payments and allowing the accounts to age.

Significant utilization on both cards will help secure higher CLIs. However, the reported statement balance can be low on both cards or even $0 on one.

A big component of trending is looking at aggregate utilization and possibly aggregate balance changes over time. For a 2 card file, AZE1 might result in a 5-8 point higher score vs AZE2 but either one is better than AZ.

Re: Credit Card Balances

CaneVariant — Sat, 25 May 2024 01:22:12 GMT

@Thomas_Thumb wrote:
@CaneVariant wrote:

For a 2 card credit rebuild would it be embrace AZE1 or have both report as sub 5% utilization? With regards to Fico10T scoring (I believe this is considered trending) for a rebuild is it better to put every monthly expense (except rent) and then pay both down to sub 5% before the statement cuts? Organic spend is ~ $2k and would not put utilization at higher than 50% at any point ie $2k charges vs $4k limits. I ask because DP's seem to indicate both Ally and Mission Lane "reward" card "users" with better CLI's. Balances above 4% will not be carried. Thank you for your consideration. Cheers!
For re-building credit it does not matter if one or both cards report balances. Both should be used. The key is developing a history of on-time payments and allowing the accounts to age.

Significant utilization on both cards will help secure higher CLIs. However, the reported statement balance can be low on both cards or even $0 on one.

A big component of trending is looking at aggregate utilization and possibly aggregate balance changes over time. For a 2 card file, AZE1 might result in a 5-8 point higher score vs AZE2 but either one is better than AZ.

Thank you very much for the prompt reply! I appreciate the knowledge bombs you frequently drop. I have been refraining from using my cards for the "basics" since I was unsure how to proceed with my rebuild with regards to utilization (that and my checking gives 2% cash back). Just going to keep farming and try to grow the limits with significant monthly utilization and sticking with sub 5% statement utilization. Cheers!