Why is simulated score higher when I leave a small balance in revolving credit?

[FesteringTTT]

I had over 15k in credit card debt.  I'm now down to the last 500 that I plan to payoff next week.  However, when I run a simulation, my score is between 670-700 if I leave a balance of 150 or more and 660-700 if I pay it all off.

Do the scoring formulas give you more points for carrying a small balance?

[MarineVietVet]

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@FesteringTTT wrote:

I had over 15k in credit card debt.  I'm now down to the last 500 that I plan to payoff next week.  However, when I run a simulation, my score is between 670-700 if I leave a balance of 150 or more and 660-700 if I pay it all off.

Do the scoring formulas give you more points for carrying a small balance?

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Hello and welcome.

For most people it works better if only one of their cards reports a small (<9% of credit limit) balance on the monthly statement and then they pay in full before the due date. On all other cards try and let them report a zero balance each month. You can use those other cards but just time your payments so that the desired zero balance is achieved.

It seems backwards but for scoring it hurts most folks to have all zero balances every month.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[marty56]

For scoring purposes, $1 reporting is just as good as 9% so I would try 0% reporting and check your scores and then try $1 or up to 9%.  It is also possible that on 0%, one score goes up and the other goes down.

Congrates on getting out of debt!

[Anonymous]

Remember too that what is reported is the total balance  not the amount you "carry" from month to month.   So your ordinary monthly purchases will be reported and that may be enough to keep your score high.

BTW Congrats on paying that off. 

[Imhotrodcrazy]

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@FesteringTTT wrote:

I had over 15k in credit card debt.  I'm now down to the last 500 that I plan to payoff next week.  However, when I run a simulation, my score is between 670-700 if I leave a balance of 150 or more and 660-700 if I pay it all off.

Do the scoring formulas give you more points for carrying a small balance?

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I just tested this theory on my TU report.  For me, when I had  a zero balance, I lost 12 points.  This  past month I left a small balance reporting and I regained all of my 12 points back.   With EQ it doesn't matter if I leave a small balance or not,  my score never seems to change. 

[MattH]

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@Imhotrodcrazy wrote:

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@FesteringTTT wrote:

I had over 15k in credit card debt.  I'm now down to the last 500 that I plan to payoff next week.  However, when I run a simulation, my score is between 670-700 if I leave a balance of 150 or more and 660-700 if I pay it all off.

Do the scoring formulas give you more points for carrying a small balance?

---

I just tested this theory on my TU report.  For me, when I had  a zero balance, I lost 12 points.  This  past month I left a small balance reporting and I regained all of my 12 points back.   With EQ it doesn't matter if I leave a small balance or not,  my score never seems to change. 

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That's because back when we could purchase all three scores I noticed a difference in how they handle revolving credit.  TU gives greater weight than the others to total dollars balance on revolving credit; EQ gives greater weight to number of accounts with balances; and EX gives greater weight to percentage utilization of available revolving credit.  My wife and I are heavy convenience users with high limit cards: we carry very little cash, we run nearly all our purchases through our cards, and we pay the full balance due at the end of each month.  We could use debit cards for everything because we always have more in the bank than our CC balances, but credit cards have stronger consumer protection laws.  This pattern means all our cards have balances every month, and those balances fluctuate quite a lot depending what we've bought in a given month.  Some months those balances can be fairly high when we have made large purchases or charitable donations (Chase Visa once rejected a $2000 donation, so now I call them before making any donation over $300 to make sure it will be approved).

[vanillabean]

It is certainly not a must for heavy convenience users with high limit cards and high scores as well as money in the bank to pay by the statement cutoff. It's refreshing to hear someone actually say that every so often.

The reason I keep the number of balances small is probably that paying sooner than later somehow leaves the foreseeable future brighter, less chance of having to pay for credit cards and unexpected stuff at the same time.

[Anonymous]

I haven't seen a hit on my TU or EQ showing $1 or all $0s.   I guess it depends on what scoring bucket you're in, too.

I like Capital One's purchase checks because there's no Cash APR attached to them and they have the same grace period as swiping.   So for large checks I write sometimes, I will write it against Capital One for one simple reason.... my checking account is interest bearing.     The interest payment for a $6,000-$9,000 average daily balance is nicer than if it was $1,500 ADB, so I will make that large check out using CapOne.

Once I've collected the interest in checking, then I'll go online and wipe out the balance on CapOne.   Sometimes I have had a balance report near max-out but that didn't trigger AA because none of my cards have Universal Default anymore.    Then the month after that all my tradelines are showing zero again.

I think this sort of activity is what caused me to get more junk mail from Citi asking me to sign up (trashed all their offers).    My big boy CL cards haven't suffered a chop either because of it.   NFCU cashRewards is also so tempting I do run as much as I possibly can through it and I'm nearly at $1,000 in rewards this year.   Haven't yet cashed my rewards out because I love watching that balance grow.

[TLinFargo]

I recently tried this as well... I had a 783 last month, with zeros across the board, then I let my Discover close with a $5 balance.

A couple things also may have contributed:

     a. Last inquiry fell off

     b. Recent auto loan aged another month

Checked again this month and I got a 795 (+12).

Trying an experiment now, charged my Disc up to $50, then paid $55 so my account will report a $5 credit. I'll follow up when it reports to the CRA.

[Anonymous]

The account will just show $0... The credit is applied internally and does not show up on your reports IME.