Fico scoring and carrying a small balance on one card...

[Anonymous]

Hello everyone,

I have a question about maximizing paying credit cards off each month or letting one carry a balance. Specifically, the generally held belief that letting one card show a small balance while having all other credit cards reporting zero is the best way to maximize Fico scoring. 

I've almost always paid every one of my credit cards off each month so that my cards report a zero balance on all cards. Any time I do report a small balance in a particular month it seems to dock my score by a few points no matter how small the balance. Here is my credit card profile:

Barclay Ring Mastercard: 5000

Capital One Quicksilver One: 6500

Capital One Quicksilver: 10,000

Capital One Venture: 20,000

Chase Sapphire Preferred: 19,000

Credit One Visa: 1300

Credit One Mastercard: 500

Discover IT: 800

Merrick Bank Visa: 850

Overstock.com: 750

Express: 700

Buckle: 650

Obviously, the Credit One and Merrick Bank cards were from when I was re-building my credit and I will be closing those soon. I don't carry a balance on any of these cards usually, however if I do it seems to hurt my score. For example, I thought I had Barclay's paid off last month, but another transaction came through for $13.25 that reported to the bureaus. My Fico dropped 4 points for just that $13.25, which, needless to say, did not make me happy. 

My question is, should I let one card report, and keep the others zero balance? Or should I keep them all at zero balance every month? I'm almost scared to let a balance report at this point for fear of it actually doing more harm than good. 

[BrianKill]

FICO is said to not like all zero balance reporting cards.  I haven't tried it.  I hear it will knock 10 or so points off.

Why don't you do your on test and let them all report a zero balance and see what happens?  Then report back.

[Anonymous]

The better test would be to let one report a balance and see how that affects my score, although I'm going to be applying for a mortgage in the  next couple of months and don't want to screw myself by trying something new. I really can't see getting a notification that my Fico score has increased because one of my cards reports a balance all of a sudden. Seems like it would work the opposite. 

[Anonymous]

Leave at least a few dollars report. Having it at 0% will lower your scores.

[Thomas_Thumb]

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@Anonymous wrote:

Hello everyone,

I have a question about maximizing paying credit cards off each month or letting one carry a balance. Specifically, the generally held belief that letting one card show a small balance while having all other credit cards reporting zero is the best way to maximize Fico scoring. 

I've almost always paid every one of my credit cards off each month so that my cards report a zero balance on all cards. Any time I do report a small balance in a particular month it seems to dock my score by a few points no matter how small the balance. Here is my credit card profile:

Barclay Ring Mastercard: 5000

Capital One Quicksilver One: 6500

Capital One Quicksilver: 10,000

Capital One Venture: 20,000

Chase Sapphire Preferred: 19,000

Credit One Visa: 1300

Credit One Mastercard: 500

Discover IT: 800

Merrick Bank Visa: 850

Overstock.com: 750

Express: 700

Buckle: 650

Obviously, the Credit One and Merrick Bank cards were from when I was re-building my credit and I will be closing those soon. I don't carry a balance on any of these cards usually, however if I do it seems to hurt my score. For example, I thought I had Barclay's paid off last month, but another transaction came through for $13.25 that reported to the bureaus. My Fico dropped 4 points for just that $13.25, which, needless to say, did not make me happy. 

My question is, should I let one card report, and keep the others zero balance? Or should I keep them all at zero balance every month? I'm almost scared to let a balance report at this point for fear of it actually doing more harm than good. 

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As you may know, affect of # cards reporting a non zero balance and credit card Ut% both on an individual basis and in aggregate. is point in time with no history. So scoring the subsequent month is not influenced by the current month.

So ... do some experimenting with # cards reporting a non zero balance. Get up some courage and let 2 report some non zero balance on their respective statements - then PIF the reported balance. Then the next month only allow only one of these same 2 cards to report a balance on its statement and PIF the reported balance.

I would suggest selecting the a couple high CL cards for balance reporting - say the Chase Sapphire and the Capital One Venture. Not sure what you spend per month but, I would suggest allowing  between $300 and $900 to report on each - which is less than 5% per. Even if you allow a total of $1800 to report your aggregate UT% will still be less than 3%.

Note: Forget about testing a micro balance of $20 on a $20,000 CL card - report a "real" balance, just keep it under 10% for the test.

I think you will find this exercise enlightening and it is a no risk test. Please note - I am talking about allowing balances to post on your statements and then PIF, NOT carrying a balance month to month. I would be interested in hearing your results.

P.S 1. I ALWAYS let all my charges post on every card I use each month and then PIF the reported balances. Typically, for me, that means having a balance report on 3 to 5 cards each month.

P.S. 2. Since you are a reporting balances for the 1st time, the Fico models may take some time adjusting to a change in your behavior. So don't freak out if there is an unexpected reaction when you 1st give it a go. Suggest picking a specific date window each month to check scores manually. That way influence of reporting cycles are kept constant.

[takeshi74]

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@Anonymous wrote:

Fico scoring and carrying a small balance on one card...

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@Anonymous wrote:

I have a question about maximizing paying credit cards off each month or letting one carry a balance.

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From the context of your OP I think it's just a matter of word choice but the recommendation is not to carry a balance.  It's to allow one to report.  Report and carry are two different things.

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jdog0411 wrote: 

I've almost always paid every one of my credit cards off each month so that my cards report a zero balance on all cards. Any time I do report a small balance in a particular month it seems to dock my score by a few points no matter how small the balance.

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You also have to be very careful when testing to ensure that your report data is what you expect it to be when the scores are generated.  Are you actually confirming that your balances have updated as expected each time you get a score?  In other words, do your reports actually indicate that all reovlvers have a 0 balance?  Do your reports acutally indicate that only 1 card has reported a balance?  Reports don't update immediately when creditors report.  How are you pulling the scores?  If you're relying on myFICO monitoring then you're only getting updates when there's trigger activity and that can possibly have an impact on your testing.

You also need to carefully review reports from before and after any scoring change because reported utilization isn't the only thing that affects score.  You need to make sure that you're accounting for all activity with a scoring impact.

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@Anonymous wrote:

The better test would be to let one report a balance and see how that affects my score, although I'm going to be applying for a mortgage in the  next couple of months and don't want to screw myself by trying something new.

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Given that you're only seeing a impact of a small number of points IMO you're unlikely to "screw yourself".  If a few points makes or breaks your mortgage then you definitely want to work on the other issues putting you in that position as well.

If you're using FICO 8's then keep in mind that mortgage lenders do not use that scoring model.

[Anonymous]

Thanks for the responses, they are very helpful. I do know the difference between letting a card report a balance and carrying a balance, should have been more clear there. I am referring to letting a card report a balance. I will pay the cards off after that occurs and not carry a balance.

I monitor my reports closely through the bureaus themselves and also through MyFico (I pay for reports to get the most updated scores if I have to, I don't just rely on Fico trigger events) so I think I do have an accurate assessment of how my reports are reporting at any given time.

I will do some testing and see how it goes. I'll report here what I do and what the effect is, if any.