Carrying A Balance

[Anonymous]

Fico reports all three bureaus as saying that a negative factor is my high credit utlization rate and that I am carrying too high a balance.

Here is what is puzzling. I pay off all cards in full, every month.

What is causing the bureaus to say this?

[Anonymous]

Do you have an installment loan that's near it's full balance (not paid down much yet)?

[Anonymous]

Hello, Brutal. Appreciate the reply.

No installment loans of any kind. Only revolving credit.

[SouthJamaica]

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@Anonymous wrote:

Fico reports all three bureaus as saying that a negative factor is my high credit utlization rate and that I am carrying too high a balance.

Here is what is puzzling. I pay off all cards in full, every month.

What is causing the bureaus to say this?

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Utilization is computed as of the balance which reports on your statement.

E.g. assume: 10 cards, $50,000 total limits, spending $10,000 in the month, paid in full every month

(a) if $9000 is paid before statement cuts, statement balances total $1000 utilization is 2%

(b) if all payments made after statement cut, statement balances total $10,000 utilization is 20%

Big difference.

Bottom line: it makes a difference to utilization whether you pay BEFORE statement cuts or AFTER statement cuts

There are those who posit that it is better for the strength of your long term credit profile to let the balances post and then pay them. I have no idea if that is true, but I do know that for short term score optimization low utilization is helpful.

[Anonymous]

Jamaica, thats great knowledge. Thank you. I did not realize that and will now pay in advance of the statement cutting.

[SouthJamaica]

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@Anonymous wrote:

Jamaica, thats great knowledge. Thank you. I did not realize that and will now pay in advance of the statement cutting.

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My pleasure.

[righthererightnow]

Are the high uti's reported before you PIF? If so, it doens't matter that you've paid them off, what matters is what's reported / the debt.

[SouthJamaica]

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@righthererightnow wrote:

Are the high uti's reported before you PIF? If so, it doens't matter that you've paid them off, what matters is what's reported / the debt.

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For utilization scoring purposes, what matters is the balance that reports on the statement, regardless of what happens after the statement date.

[Anonymous]

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@Anonymous wrote:

Jamaica, thats great knowledge. Thank you. I did not realize that and will now pay in advance of the statement cutting.

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If you pay off every credit card in advance of the statement cutting, then all your credit cards will report as $0.  This will also hurt your score. 

Just an FYI.

One card reporting a small balance and all others reporting $0 is best when you are trying to sueeze every additional point out.  (Some other variations on that can also work, depending on the person's profile, but that will always work.)

As Sj alluded to, as a long term strategy, paying your cards in full after each statement posts works fine, just as you have been doing.  The ultra low utilization thing can be done any time you want your score to be at its peak.  For many people (me included) it's an unnecessary hassle to try to pay all or most cards to $0 before each staement cuts and to do that every single month.  People in our camp just let the statements cut and debit our checking about -- for most months. 

Best of luck...

[Anonymous]

Hey, Dixie. Appreciate the heads up. That definitely makes sense, and is certainly less of a hassle. Should I need to max out my score, will calibrate my payments accordingly so my reporting reflects zero balance except for one small one.

Have a great evening!