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Should I leave a balance?

Member

Should I leave a balance?

Hello everyone, so in one of my posts I mentioned my score dropping 14 points and I thought it was my credit history since I opened a new card. I’m partially correct but multiple people mentioned saying that it could also be since I don’t leave a balance in my cards. My question is should start leaving 1% across all cards to have 3% total or should I alternate between leaving 1% this month on the amex then 1% the next month on the discovery? Or should I not leave a balance? I’m fairly new to credit building and don’t want to jeopardize it or not properly build my score up over foolish things like not leaving a balance or leaving a balance. Thank you!
Message 1 of 16
15 REPLIES
Community Leader
Senior Contributor

Re: Should I leave a balance?

For optimal scoring, report a small balance on one card ($5, but not much more), with the rest reporting zero.

Message 2 of 16
Contributor

Re: Should I leave a balance?

There is an important distinction between "carrying a balance" and "reporting a balance". You don't need to pay any interest on your cards to get a score boost. When your credit card statement date comes around it takes a snapshot of your balance and reports that to the credit bureaus. The optimal for scoring would be to have one card report less than 8.99% but greater then $0. Then have the rest of your cards report $0, its commonly referred to here at the AZEO (All zero except one) method. After you get your credit card statement you do not need to carry any balance forward. Pay in full during your grace period and you won't pay any interest and you will get the same score boost.

Message 3 of 16
Super Contributor

Re: Should I leave a balance?

While it's somewhat semantics and gets into a glass half full glass half empty argument, I would not say that anyone receives a score "boost" from using AZEO [relative to all zero balances] but rather they're not receiving the scoring penalty associated with "no recent revolving credit use."

Message 4 of 16
Regular Contributor

Re: Should I leave a balance?

One thing I do is use as close to the limit as possible (within means) and pay it all to 0 before payment due (that way it shows you use that amount responsibly and will also help with CLI later as well) but then I agree with the AZEO method once you pay all your cards or you can do 1 dollar on each statement as long as it's no more than 8.9% accross ALL your cards Smiley Happy     Hope that helps 

Starting Score: 537
Current Score: 713
Goal Score: 775


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Message 5 of 16
Super Contributor

Re: Should I leave a balance?

It is not recommended to leave just $1 to hopefully report, as many creditors will "forgive" the small balance and report $0.  Some do this for $1, $2, $3 and BoA up to $4.99 I believe.  As a general recommendation on this forum to cover all bases, a balance of $5 left will more than likely report and not be forgiven.

Message 6 of 16
Contributor

Re: Should I leave a balance?

Yes I can confirm from personal experience the penalty applied for not using my cards.  I have been rebuilding credit for a few years now and have tried different payment strategies to see different results.  

In my mind, my cards' cycles start ending and reporting from 22nd of the month and end with my Chase Freedom ending 3rd of the following month.  (probably should start thinking about it in reverse order)  I paid every single balance down because I started wondering what impact "never paying a card to $0" has on scoring and lending.  

 

so for the first time, every single card reported $0 or -$.  It was for 1 whole day before my Chase Freedom reported a $381 balance.  The card reported $0 the previous statement so Experian was the first bureau to reflect all the other cards at $0 and my score went down from 684 to 670.  My mortgage, auto, and bankcard scores all went down as well.  

 

Equifax went down from 729 to 716.  

Transunion was last to have the cards ending 1st report so then that also went from 719 to 701. 

 

The moment my Freedom card reported the $381 (happened on different days for all 3 bureaus) this is what happened:

EX- 670 - 684

EQ - 716 - 729

TU - 701 - 719

 

my TU on myFICO even said that not using my revolving credit hurt my score.  

started tracking Experian - Starting Score:523 | Current Score:672 | Goal Score:740
now tracking all 3

2/8/19
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Message 7 of 16
Super Contributor

Re: Should I leave a balance?


@slowbut850sure wrote:

 

 

my TU on myFICO even said that not using my revolving credit hurt my score.  


That's of course not using your credit in the eyes of FICO, as many people can and do use their cards all the time, yet PIF their current balance to $0 and that $0 balance reports.  It's important to make this distinction when it comes to scoring, because as you saw you can use your credit cards regularly and still experience a scoring penalty for "no revolving credit use" because the algorithm cannot tell you're using it when only $0 balances are reported.

Message 8 of 16
Regular Contributor

Re: Should I leave a balance?


@BrutalBodyShots wrote:

@slowbut850sure wrote:

 

 

my TU on myFICO even said that not using my revolving credit hurt my score.  


That's of course not using your credit in the eyes of FICO, as many people can and do use their cards all the time, yet PIF their current balance to $0 and that $0 balance reports.  It's important to make this distinction when it comes to scoring, because as you saw you can use your credit cards regularly and still experience a scoring penalty for "no revolving credit use" because the algorithm cannot tell you're using it when only $0 balances are reported.


BBS,

 

Your advice is always on point and helpful. So, I think you just clarified a long-standing question I've had on AZEO. The concept I understand generally - all revolving accounts report $0 balance except one - pretty straightforward. 

 

However, my question always was:

 

1) For the accounts that report $0 - does that mean you can't charge on them at all once they get to $0? or....

2) For the accounts that report $0 - does that mean you CAN charge the heck out of them during the month, as long as you have them paid down to $0 by the closing date?

 

I think according to your last post, it's the latter that applies? Or, I guess either can apply, but I suppose you aren't getting "credit" for making use of the card in the eyes of the creditor if you simply never use the $0 balance cards?

 

Also, is there any upside to PIF before the due date, as opposed to PIF before the closing date?

 

Thanks!!



Current Scores Dec 2018 – FICO 8
Message 9 of 16
Regular Contributor

Re: Should I leave a balance?

I always use the heck out of my limit then pay it to 0 when payment due then have a TINY bit showing as long as all of your cards add up to the 8.9% then the AZEO method still applies for example I have one card at 5% one card at 2% and one at 1% and it works Smiley Very Happy    But I still use my limit and be sure to pay down to 0 when payment is due then get it up to the 1 or 2% etc when the statement hits Smiley Happy

Starting Score: 537
Current Score: 713
Goal Score: 775


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Message 10 of 16