How does "High Balance" affect me?

[Thomas_Thumb]

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@Aahz wrote:

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@Thomas_Thumb wrote:

High balance is only a placeholder or marker that represents the highest amount you let report on a monthly statement for that card. Typically the high balance listed is your highest reported balance during the last 2 years (as a minimum - could be much longer). If you allow $800 to report, your high balance will show as $800 for the next two (or more) years. That's really not an issue 

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The high balance reported does not need to be the statment balance.  If you charge $1000 to a credit card, then PIF before statement cut, the $1000 will still appear in the High Balance box on your report.

I don't know if this is true for NPSL charge cards, as I don't use charge cards, but it's true for credit cards.

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Aahz, I appreciate the clarification regarding high balance. I never prepay and didn't think of that scenario.

So, perhaps I could put a large charge on my AMEX to jack up HB and then pay it off before statement cuts. That might avoid a point in time credit slam. However, I think it would be more interesting to see how score reacts to 100% "psuedo utilization".

[Anonymous]

I think one of the things the OP is getting at is whether or not the visible "high balance" on an account that can be seen by a lendor/creditor can be a deterrant.  Like if a card has a $10k limit and 99 times out of 100 the card holder has PIF or left a balance of a few hundred bucks, then that 1 time out of 100 they had an $8000 balance which was immediately PIF the following month after it reported... we all know that month that it reported there would be a score hit, and that the following month it was paid off scores would rebound.  However, for the next several years (maybe longer) on that account info it will say "high balance $8000" which anyone looking at the account, possibly considering extending new credit, can see was 80% at one point.  I think the OP may want to know if that small 80% snapshot could be a deterrant to whoever is looking at the account.

I think it can be argued both ways.  One, it shows that the card holder reached 80% utilization AT LEAST once (you don't know how often)... however, the converse argument is that now they have a $0 balance so it shows that they are able to pay down that 80% to 0% which in fact is a greater sign of creditworthiness.

Overall, then, I don't really think that "high balance" really matters to anyone as these two arguments can cancel each other out. 

[Aahz]

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@Anonymous wrote:

I think one of the things the OP is getting at is whether or not the visible "high balance" on an account that can be seen by a lendor/creditor can be a deterrant.  Like if a card has a $10k limit and 99 times out of 100 the card holder has PIF or left a balance of a few hundred bucks, then that 1 time out of 100 they had an $8000 balance which was immediately PIF the following month after it reported... we all know that month that it reported there would be a score hit, and that the following month it was paid off scores would rebound.  However, for the next several years (maybe longer) on that account info it will say "high balance $8000" which anyone looking at the account, possibly considering extending new credit, can see was 80% at one point.  I think the OP may want to know if that small 80% snapshot could be a deterrant to whoever is looking at the account.

I think it can be argued both ways.  One, it shows that the card holder reached 80% utilization AT LEAST once (you don't know how often)... however, the converse argument is that now they have a $0 balance so it shows that they are able to pay down that 80% to 0% which in fact is a greater sign of creditworthiness.

Overall, then, I don't really think that "high balance" really matters to anyone as these two arguments can cancel each other out. 

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Wether it's good or bad depends on the overall look of the file.

If the file's got a lot of recent dirt then the HB would likely be assumed to be recent (possibly chronic) and indicate someone who's on the road to default.

But if the file is long and clean then it shows the prospective creditor that this is a person who USES their cards, thus generating more profit than someone who does not and, due to the long history of clean reporting is a safe risk as well.

[Anonymous]

Overall look of the file is important, no doubt, but I think the most recent history is the most important.  You can have someone with a so-so file with some dirty stuff in the recent past (say 1-3 years) but if he just ran up his $10k card to 90% utilization last month but PIF this month down to 0% utilization, I don't think the $9k reported "high balance" is as negatively significant as his "dirty" file may suggest as he just paid off $9k in a month seemingly without a hitch.  Certainly his income supports the ability to conquer that high balance in 1 monthly cycle which can be viewed as positive creditworthiness.

Conversely, one could have a 100% clean file and their $9k "high balance" could have been 6 years ago, but they are just paying off that $9k today having carried significant utilization for a large portion of the last 6 years.  While this person has a cleaner file, likely higher scores and has been consistent in making payments over 6 years it would suggest to me that based on all of the interest they had to pay over that time and the length of time required to pay down that balance that they financially were unable to do any better than they did. 

I could see one making an argument for either of these people as possessing creditworthiness prowess.

[elim]

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@Anonymous wrote:

I think one of the things the OP is getting at is whether or not the visible "high balance" on an account that can be seen by a lendor/creditor can be a deterrant.  Like if a card has a $10k limit and 99 times out of 100 the card holder has PIF or left a balance of a few hundred bucks, then that 1 time out of 100 they had an $8000 balance which was immediately PIF the following month after it reported... we all know that month that it reported there would be a score hit, and that the following month it was paid off scores would rebound.  However, for the next several years (maybe longer) on that account info it will say "high balance $8000" which anyone looking at the account, possibly considering extending new credit, can see was 80% at one point.  I think the OP may want to know if that small 80% snapshot could be a deterrant to whoever is looking at the account.

I think it can be argued both ways.  One, it shows that the card holder reached 80% utilization AT LEAST once (you don't know how often)... however, the converse argument is that now they have a $0 balance so it shows that they are able to pay down that 80% to 0% which in fact is a greater sign of creditworthiness.

Overall, then, I don't really think that "high balance" really matters to anyone as these two arguments can cancel each other out. 

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  Like I said...  Some of us move limits, reduce limits, or have been CLD during a recession, and have High Balance listed as many times greater than the current limit.  It hasn't led to a denial (for me) and when I asked the LO at my CU, while we were looking over my reports, she said "it's fairly common and is not a factor. It looks like you purchased a large item and paid it off"

example...

Limit 3.5k

Balance $0.00

High Balance $11,277.08

[Anonymous]

Right, the key part of what you said being "...and paid it off."

Having a high balance is certainly far less of a factor if it's for 1 cycle and will always be far less of a concern if it is short term rather than long term.