New accounts and PIF

[Anonymous]

I've read somewhere that you should not leave a balance on a new account. A new CC that is two years old or less. Is this true?

[NRB525]

Two years or less? Where did you hear this? And what is the associated reason given for why this would be considerd a good idea? Whart is the objective with waiting 2 years?

[Anonymous]

Hey Atlantic.  Can you clarify for us first what you mean by "not leave a balance"?  Even when someone pays his balance in full each month (PIF), that balance still reports to the CRAs, assuming he does the normal thing which is to pay after his statement prints. 

Or do you mean: pay off the balance before the billing cycle ends so that it reports $0 to the CRAs?

[Anonymous]

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@NRB525 wrote:

Two years or less? Where did you hear this? And what is the associated reason given for why this would be considerd a good idea? Whart is the objective with waiting 2 years?

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Ok, first and foremost I am  a newbie. I read somewhere (I believe on another fico forum post), that it's a good idea to PIF your monthly balance before the said due date, if your CC account is less than two years old. The associated reason is that creditors look for lenders to establish a trust.

[Anonymous]

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@Anonymous wrote:

Hey Atlantic.  Can you clarify for us first what you mean by "not leave a balance"?  Even when someone pays his balance in full each month (PIF), that balance still reports to the CRAs, assuming he does the normal thing which is to pay after his statement prints. 

Or do you mean: pay off the balance before the billing cycle ends so that it reports $0 to the CRAs?

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I apoligze, I mean paying off the balance before the billing cycle ends. And yes, so there is a $0 reported to the CRA's. Is this a good idea if your CC account is less than two  years old? 

[Revelate]

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@Anonymous wrote:

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@Anonymous wrote:

Hey Atlantic.  Can you clarify for us first what you mean by "not leave a balance"?  Even when someone pays his balance in full each month (PIF), that balance still reports to the CRAs, assuming he does the normal thing which is to pay after his statement prints. 

Or do you mean: pay off the balance before the billing cycle ends so that it reports $0 to the CRAs?

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I apoligze, I mean paying off the balance before the billing cycle ends. And yes, so there is a $0 reported to the CRA's. Is this a good idea if your CC account is less than two  years old? 

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Makes no difference.  While fewer accounts reporting $0 a balance is beneficial from a FICO scoring perspective, from a lender one it's irrelevant.  Remember the vast majority of consumers don't do this, we're the outliers pre-paying before statement cut.

Edit: sigh, I need more sleep, last few days the words being spewed on the page are just dumb and stupid.

[Anonymous]

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@Revelate wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Hey Atlantic.  Can you clarify for us first what you mean by "not leave a balance"?  Even when someone pays his balance in full each month (PIF), that balance still reports to the CRAs, assuming he does the normal thing which is to pay after his statement prints. 

Or do you mean: pay off the balance before the billing cycle ends so that it reports $0 to the CRAs?

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I apoligze, I mean paying off the balance before the billing cycle ends. And yes, so there is a $0 reported to the CRA's. Is this a good idea if your CC account is less than two  years old? 

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Makes no difference.  While fewer accounts reporting $0 is beneficial from a FICO scoring perspective, from a lender one it's irrelevant.  Remember the vast majority of consumers don't do this, we're the outliers pre-paying before statement cut.

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Thank you

[Anonymous]

No need to apologize, Atlantic!  Glad you are here.

The reason I asked was twofold.  First is that we can't really answer your question until we have helped you ask the question you are really interested in.  Second and more importantly I thought there might be a confusion in your mind between PIF, carrying a balance, and reporting a balance.  All three things mean different things and they are important distinctions.

The only reason for thinking that  FICO might give a slightly greater penalty to a recently opened card showing a balance and a much older card showing a balance, is that FICO published a list of "reason codes" a long while back.  These are the reasons FICO has for dinging your credit score.  And one of those codes was "amount owed on recently opened revolving accounts is too high."

Now there are a huge number of reason codes and a lot of them apply to models that are not often used (e.g. FICO NextGen).  I think that code in particular is associated with NextGen.  But the existence of that reason code suggests that in at least one scorecard for one model in the past, FICO was using this as a (possibly very minor) factor.  So I don't think it is a crazy possibility that FICO views it as riskier when a newly opened card starts having a big balance on it then when an older card that you have used for a long time does.  I am not saying FICO does this!  Just that yeah, it could be the case that it did this in one of its models.

Since you are new, the key takeaway advice for you buddy is to use your cards as you need to, keep them away from being even close to being maxed out, and pay your balance in full after the statement posts but before it is due.  Basic common sense.  Those things do not give you a score bonus but they are habits that lead to other kinds of score benefit. Then if you ever have a short-term need to get every available extra point, zero out all the cards except one (and keep that one positive balance reasonably small).  Good luck.

[NRB525]

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@Revelate wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Hey Atlantic.  Can you clarify for us first what you mean by "not leave a balance"?  Even when someone pays his balance in full each month (PIF), that balance still reports to the CRAs, assuming he does the normal thing which is to pay after his statement prints. 

Or do you mean: pay off the balance before the billing cycle ends so that it reports $0 to the CRAs?

---

I apoligze, I mean paying off the balance before the billing cycle ends. And yes, so there is a $0 reported to the CRA's. Is this a good idea if your CC account is less than two  years old? 

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Makes no difference.  While fewer accounts reporting $0 a balance is beneficial from a FICO scoring perspective, from a lender one it's irrelevant.  Remember the vast majority of consumers don't do this, we're the outliers pre-paying before statement cut.

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[slack jaw emoticon]...

Edited

[NRB525]

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@Anonymous wrote:

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@NRB525 wrote:

Two years or less? Where did you hear this? And what is the associated reason given for why this would be considerd a good idea? Whart is the objective with waiting 2 years?

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Ok, first and foremost I am  a newbie. I read somewhere (I believe on another fico forum post), that it's a good idea to PIF your monthly balance before the said due date, if your CC account is less than two years old. The associated reason is that creditors look for lenders to establish a trust.

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Ok, well, we're all here to learn

The CCC gives you a credit card with a credit line that they think you can handle. Sometimes this is a low amount, but as a responsible adult, you've been given credit. If there's a legitimate purchase you plan to make and you want to pay it off over time, then you charge the item to the card, new or old, and put it in your budget how you are going t pay it off. In most cases, the CCC prefers you to use their card before you use other CCC cards. The bank earns swipe fees. They may earn interest if the cardholder ends up carrying a balance. They want your business. If the lender gets uncomfortable with the payment patterns of the borrower, some lenders will cut the credit line to reduce their risk. If the borrower shows that they can borrow and pay back the money, then over time many CCC will provide credit line increases.

And, if the one new card is the only card the cardholder now has, that card must show a balance in order to start up the FICO scoring in a serious way. Zeros aren't going to give the FICO model anything to work with.

Now, my opinion is, one should show a balance, even if PIF by the payment due date, on every credit card statement nearly every month. But I'm something of an outlier here.

No problem asking questions, like I said, we're all learning here.

Cheers!