1% credit card usage versus 0%

[Anonymous]

Can anyone tell me how accurate the FICO Simulator can be? I owe $799 in credit card debt and I used the FICO Simulator to see what my score would be if I had zero balance and it showed my score after 1 month would be the same as now. I also used the simulator to see what my score would be if I paid $200 for 1 month and it showed my score would increase by 25 points. Is it better to have a small balance on one of my credit cards than to have a zero balance on all of them? Thanks a lot. 

[pdog661]

Hi,

I paid all my cards to 0, and my score went down.  Remember UTL rounds up so if you let 1 dollar report on 1 card it will show a 1% UTL, and this in my experience will show a higher score then 0% utl.  Many on these boards say 9% is the magic number, but for my 1% does better then 9%. 

YMMV

Good luck.

[Anonymous]

I have found 1% to be the sweet spot also.

[lithium78]

This may be a stupid question, but I have always paid every credit card in full, so I don't know the answer:  To let a balance report, you have to pay interest for the month, right?

[jake619]

No. The statement closes and then the grace period begins, usually around 25 days or so. If you fail to pay the posted balance by the due date then interest is imposed.

[Anonymous]

It is not good for scoring to have 0% ulilization, if you look at the graph at credit carma they sort people with 0% in the grade C with people who have 41-60% utilization.

It is not that drastic in general, but you have to borrow money and it has to show that you can borrow and pay it back, if it shows 0 that does NOT build you credit. So Anything between 1-9 % would be cool...

[Anonymous]

On a 1% balance (depending how much total credit card credit one has) is minimal. If you owe just a few dollars on one card it will probably round up and show 1%. For those needing a few points to qualify for a mortgage, it might be worth a few dollars or cents of interest. In addition to using the FICO Simulator, I have used several other simulators on my account and a friends account and they all show a better credit score with a minimal balance. I have 7 cards and carry a balance on only 1 of the cards. I have read that carrying a balance on multiple cards can lower ones score. If someone has additional information on having multiple balances, please let us know. Thanks a lot.

[SnackTrader]

LETTING A BALANCE REPORT DOES NOT MEAN PAYING INTEREST!

Your monthly statement period is around 30 days long every month. You'll notice that at the end of that statement period a balance shows up as "amount due". That is a minimum payment. Another amount shows "balance", which is the total amount you need I pay to avoid interest.

Credit scoring only knows what goes on your credit report. And most (but not all) credit card companies only report to the bureaus once a month. The members here have found that this is almost always on the statement end date. What they report is that "balance" number that exists in the statement end date. We advocate, for highest score, that the amount of your balances reported be zero for all cards except one. That one card should then report 1-9% usage. Once that statement cuts, please pay the remaining balance in full if you can to avoid interest. We do not advocate paying interest, and that has not been shown to in any way increase credit score.

Also, you do not have to do this every month if you do not want to. Most only do it as they are preparing for new applications.

[SnackTrader]

I should have also stated that what I explained is the difference between "letting a balance report" and "carrying a balance". I never carry a balance, but I almost always let a balance report. It makes financial sense to avoid carrying balances if you can.

[Anonymous]

Great information SnackTrader, I appreciate how so many are helping out others. This credit stuff is tricky and we all need as much knowledge about it as we can get. Thanks a lot.