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Will Paying Only 1 Balance to 0 Hurt or Help?

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Repairman
Established Contributor

Will Paying Only 1 Balance to 0 Hurt or Help?

I know that paying all of your balances down to 0 will cause your score to drop in points, but will the same happen if only 1 balance is paid to 0? 

 

I just paid down a card with an $11,000 cl to 0 from a last reported statement balance of $6800. I still have 5 other cards with significant balances. The 0 balance card has not reported yet. Would it be beneficial to me, scoring wise, to let that card report as 0, or should I continue to charge on that card over the next few days and let a couple hundred dollars report the next time it updates? 

 

Thanks in advance for your suggestions and help.

4 REPLIES 4
Jnbmom
Credit Mentor

Re: Will Paying Only 1 Balance to 0 Hurt or Help?

Using the AZEO method all balances zero except one gives you the best scoring boost. Your goal should be be to pay down your debts and ceratainly if you can avoid it to do not carry balances on all your cards, depending on utlization, too many balances can be a score killer.

EXP 780 EQ 791TU 795
Message 2 of 5
Medic981
Valued Contributor

Re: Will Paying Only 1 Balance to 0 Hurt or Help?

Your question is about utilization and utilization accounts for 30% of your total FICO score. As I understand it, FICO gives you a score boost if your utilization is below 8.9%. Above 8.9% to 28.9% FICO scoring is neutral as this range does not help nor hurt your FICO scores. Above 28.9% you incur a FICO scoring penalty and above 68.9% you incur a major FICO scoring penalty.

 

Ultimately, what a person needs to improve their FICO scores and build credit are three open credit cards (secured or unsecured) in good standing and one open installment loan in good standing such as a car, home, student, personal, share secured, or credit building loan. This combination is what the myFICO score theorists here have determined is what you need for optimal credit building and FICO score. You can have more CCs and more installment loans, however, this will not increase your FICO scores.

Next, (this is only important if you are attempting to purchase a large ticket item like a home or car) is paying in full all of the credit card balances each month, before the posting date, except one. This is called the All Zero Except One (AZEO) method. The one credit card you allow to post a balance needs to be less than 8.9% of the credit limit of the card. So using one card each month to buy lunch, letting it report and then paying in full will maximize FICO scoring. Keeping your utilization of your cards below 28.9% both individually and collectively will prevent you from incurring a FICO scoring penalty.

An installment loan will have its greatest impact on your FICO score when the amount owed is at 8.9% or less of the original amount owed which is usually in the final months before the loan is paid in full. If you don't have an installment loan you can check into SelfLender or a Share Secured Loan at a Credit Union.







Your FICO credit scores are not just numbers, it’s a skill.
Message 3 of 5
Thomas_Thumb
Senior Contributor

Re: Will Paying Only 1 Balance to 0 Hurt or Help?


@Repairman wrote:

I know that paying all of your balances down to 0 will cause your score to drop in points, but will the same happen if only 1 balance is paid to 0? 

 

I just paid down a card with an $11,000 cl to 0 from a last reported statement balance of $6800. I still have 5 other cards with significant balances. The 0 balance card has not reported yet. Would it be beneficial to me, scoring wise, to let that card report as 0, or should I continue to charge on that card over the next few days and let a couple hundred dollars report the next time it updates? 

 

Thanks in advance for your suggestions and help.


Paying off the credit card will only help your score by taking a highly utilized card (68% UT) to zero. The Fico scoring penalty states: "Your score was hurt by NO RECENT activity on your REVOLVING Credit accounts." Any revolving account reporting a balance is considered recent activity. Note: Charge cards (like AMEX) are not considered revolving accounts and therefore their use does not represent revolving account activity.

 

As mentioned above revolving utilization has a major impact on your score both in aggregate and on an individual card basis. Aggregate utilization reigns supreme and must be under 9% for best results. Individual card utilization is influential particularly at high utilization rates. Balances reporting on individual cards should be maintained kept under 29% each.

 

OP, with your file, you should also notice a score benefit if you can reduce # cards reporting balances from 6 (now 5) to 2 or even 3.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 4 of 5
SouthJamaica
Mega Contributor

Re: Will Paying Only 1 Balance to 0 Hurt or Help?


@Repairman wrote:

I know that paying all of your balances down to 0 will cause your score to drop in points, but will the same happen if only 1 balance is paid to 0? 

 

I just paid down a card with an $11,000 cl to 0 from a last reported statement balance of $6800. I still have 5 other cards with significant balances. The 0 balance card has not reported yet. Would it be beneficial to me, scoring wise, to let that card report as 0, or should I continue to charge on that card over the next few days and let a couple hundred dollars report the next time it updates? 

 

Thanks in advance for your suggestions and help.


Yes it's a good thing. The more zeroes the better, so long as there's still one card left reporting a small balance. So for now you should look at every zero as a great accomplishment in building your scores.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 5 of 5
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