@Anonymous wrote:
So how will they figure in when you pay before statement cuts? Will you look like a transactors then.....or neither -because it looks like you don't use the cards?
I try to pay most cards off before statement cuts - because my limits aren't very high - I can't report much because it will make UTIL look high. As CLs increase that will be easier to just let it report and PIF. Also - I don't want ALL my cards to report a balance - just one or two - and I almost always PIF (except for one card that has 0% interest for 12 mos and we bought DH new tools for work....that will be paid before promotional period ends - but we are carrying it out.)
I wonder because if they are going to look at that starting next year - which is when we plan to shop - I want to start making it look as good as I can.....Thanks.
See Thom Thumb's last post. He's totally got it right. If you pay down to zero before the statement cuts, then you look just the same as a person who's never using that card. Like a card that is sitting in someone's shoebox.
But there's no problem with paying your card down to a small amount shortly before it reports, letting it report, then paying that small amount in full. When a person is in your situation -- which is a person who wants to pay in full, has a small credit limit, but wants to spend all of that CL per month -- then the best approach is to make two payments, just as you suggested. Pay the card down to $10 a week before the statement cuts, and then PIF the amount on the statement a week AFTER it cuts. Two payments. With your approach you get both benefits: a low utilization AND creating a clear paper trail of card use and payment in full.
And yes, according to the NYT news article (see the link I gave earlier) all mortgage lenders will be required (starting mid 2016) to be making distinctions between Transactors and Revolvers.
As you mentioned, part of your behavior right now is clearly to be a revolver. You have bought your husband tools on a 0% card and are carrying most of the balance over each month (though you are steadily paying it down). It sounds like, given the news article we have been discussing, you want to mitigate that as much as you can with some pure Transactor behavior on some of your other cards.
Let me say that nobody knows right now how these kind of T-R models are going to work. From that NYT article, it sounds like Fannie Mae is going to integrate a model made by TransUnion into their Desktop Underwriter product. (The TU technology will presumably work on the data from the other sets of CRA data too.) That said, here's some advice that in my opinion seems reasonable given what little we do know:
If you are acting as a revolver on one account....
* try to always pay significantly MORE than the minimum payment every month. Within the cohort of Revolvers, the most risky by far are the people who only pay the minimum payment. People who are clearly exhibiting a desire to steadily pay down a CC debt with substantial monthly payments will likely be treated in a more friendly way than people who do not. Note this language from the NYT piece: "[The historical data] will go back 30 months, showing whether payments were made on time, and more important, whether borrowers tend to carry balances from month to month, pay more than the minimum or pay off balances in full."
* try to limit revolving behavior (carrying a balance) to as few accounts as you can.
* try to exhibit clear unambiguous transactor behavior on all other CC accounts. That does not have to mean showing a positive balance every single month on every card. It does mean showing that sort of behavior at least once every 11 months, even if it is a card that you rarely use. And "unambiguous" here would mean try always being a transactor on that account if you can -- never carrying a balance (for the last 30 months ideally).
* In the run up to a major credit need (especially a house) see if you can stop being a revolver on all accounts. That's not possible for everyone, or perhaps it doesn't make financial sense given the positive tradeoff you are getting from a 0% card. But at least consider that as an option. Eliminating the "carrying a balance" behavior a solid four months before you think you will go through formal underwriting.
Now: how important is all this going to be? Like I said, I think nobody really knows. Obviously more fundamental behavior like never being late on your payments is a lot more important. But since nobody knows, it seems like it's worth trying to do just to be on the safe side. And if we discover a year from now that it is important, you won't be able to just snap your fingers and create a history of transactor behavior where one has not existed. So in my opinion it's worth getting started early on it.
Final note: As long you don't have a particular need for a high score right now, I would drop the idea of trying to have several zero balance cards every month. That only gives you an advantage in the two months before a major credit pull. Right now it's wiser to be creating a history of transactor behavior, which means as many cards as would naturally report positive to do so (and then always PIF). (Just don't freak out over it, trying to buy stuff that you don't want just to show a balance on a card. That's silly of course.)
