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Credit card "balances" and FICO

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
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Credit card "balances" and FICO

I just checked my score and saw that one report mentioned my credit card "balances" as a negative.  The thing is, I pay off my balances every month. The amount this month was about $1,000.  What expenditure on a credit card monthly will be considered positive??  I am frustrated, because I have several credit cards, use about 2 per month, and always pay them off every month, yet this is considered a negative?  So, are we supposed to have credit cards and never use them to keep up a FICO score??

2 of my scores are 759 and 763 and the lower one mentioned this as a negative. (My score has gone down from the 780's because of 1 late payment, so I know it is not all the credit card).

 

Help me understand this nonsense please...

Message 1 of 6
5 REPLIES 5
Valued Contributor

Re: Credit card "balances" and FICO

Virtually all CC report the statement balance. It doesn't matter if that amount is paid by the due date. On the next statement date, they will report that amount.

 

The total amount could be "too high" or too high compared to your limit. If your total limit is $20,000 and the total showing on your statements is $10,000 then that is 50% utilization.

 

If those are actual FICO scores then your credit is very good. You need to understand that they will identify the largest negative factors that hurt your score even if those factors are almost insignificant. With scores around 800, the negative factors can become pretty silly. Still, the report does show the largest negative factors, even if fixing them didn't help your score by more than a couple points.

Message 2 of 6
Valued Contributor

Re: Credit card "balances" and FICO

Many people pay off their credit card balance a few days prior to the statement cut date and then don't use the card again until the statement actually drops. That is the way to show your zero balances. It takes a bit of micormanaging to accomplish this.

 

My husband and I were confused about this at first as well. We always paid everything off each month but had a mortgage lender comment that we owed $6k on credit cards that we had not listed as a debt. It was all paid off, but that wasn't what was showing on our credit reports. At that point in time we changed to paying them off prior to the statement cut date.

 

It's not necessary to do this, but it is a way to maximize your scores.

Message 3 of 6
Regular Contributor

Re: Credit card "balances" and FICO

I am not sure that is true.  The general guidance I see is that the reported amount should be between 3% and 9% of the limit on that card.   I do know that when I have reporteda 0 balance my score tends to bea bit lower and I see comments like I am not using credit  (even though I am even if I pay before the cut date).

 

 

Who knows?  in the end unless you are about to apply for credit this should not matter.

Message 4 of 6
Valued Contributor

Re: Credit card "balances" and FICO

If you have one CC, it may be best if your balance isn't quite $0. If you have more cards, there is a point where it becomes a disadvantage to have a balance on "too many" cards. I couldn't tell you if this happens with 2 CC, 3, or more since I don't know anyone that has that few.

 

Most people are finding they get the best score if they have all accounts reporting $0 except ONE. I usually get dinged when I pass half of my accounts reporting a balance. I recently had a period where I had balances on all my accounts at one time. This dropped my score from 701 to 696. When I got 2 accounts to report $0, I went back to 701. I now have 3 accounts reporting $0 and will have 2 more reporting $0 by the end of the month. I am not expecting a score change until I get down below half of my accounts reporting a balance.

Message 5 of 6
Senior Contributor

Re: Credit card "balances" and FICO


@cassierat wrote:

I just checked my score and saw that one report mentioned my credit card "balances" as a negative.  The thing is, I pay off my balances every month. The amount this month was about $1,000.  What expenditure on a credit card monthly will be considered positive??  I am frustrated, because I have several credit cards, use about 2 per month, and always pay them off every month, yet this is considered a negative?  So, are we supposed to have credit cards and never use them to keep up a FICO score??

2 of my scores are 759 and 763 and the lower one mentioned this as a negative. (My score has gone down from the 780's because of 1 late payment, so I know it is not all the credit card).

 

Help me understand this nonsense please...


To maximize your scores you should let no more than 50% of your accounts report a balance. Less is better though it can vary from credit bureau to bureau. YMMV.

Message 6 of 6