Paying off Credit Cards

Anonymous · ‎08-28-2008

I'm curious how FICO scoring works in respect to paying off credit cards. I've never missed a payment but will the FICO score also be determined on how much of the credit card bill is being payed off each month? For instance will my FICO score increase more if I pay off all my credit at the end of each month as oppose to paying off 75%, 50%, 25% or the minumum? Or is it just based on whether or not you have a late payment. Thanks.

llecs · ‎08-28-2008

Scrubbicus wrote:
I'm curious how FICO scoring works in respect to paying off credit cards. I've never missed a payment but will the FICO score also be determined on how much of the credit card bill is being payed off each month? For instance will my FICO score increase more if I pay off all my credit at the end of each month as oppose to paying off 75%, 50%, 25% or the minumum? Or is it just based on whether or not you have a late payment. Thanks.

Utilization plays a huge part in your score (30% I think). So, having your CCs report at or near $0 is naturally a better option. Late payments or payment history is about 35% of your FICO score (I think, may have the two switched). While utilization is just a snapshot of your balances in comparison to your CLs at that moment and can easily be fixed the following month, payment history is long lasting and can play a role for the entire 7 years that the account may report, but does get better with time.

In short, you'd want your CCs to report 10% or less for optimal effect.

Anonymous · ‎08-28-2008

What does CL mean?

Also what necessarily do you mean when you said this:

"...payment history is long lasting and can play a role for the entire 7 years that the account may report, but does get better with time"

Payment history referring too...? Message Edited by Scrubbicus on 08-28-2008 02:40 PM

Message Edited by Scrubbicus on 08-28-2008 02:40 PM

llecs · ‎08-28-2008

CL = credit limit

You had brought this up:

"Or is it just based on whether or not you have a late payment"

I was pointing out that both utilization and payment history (65% total of your score) has a huge impact. FICO includes into the score your payment history like lates, charge-offs, collections, public records, etc. If, tomorrow, you are 30 days late on your Visa, and you have an otherwise clean history, then that may drop your score 50 points or more if it reports. But this time next year, the damage may only be 25 points, the year after, nearly non-existent.

On the really bad side, if that same card was charged-off and went to a CA, your score could easily drop 50-100 points or more (depending on your report and the baddie). Like a late payment, your score will gradually rebound in time, and if remaining for the full 7 yrs, you may only get back 25-70 points when it falls off because with each passing year, you get points back.