HELP - regularly paying off credit reduces credit score - I can't find any admission

[Spartacus]

that this happens in any official publication

Gary North wrote an article about being scared of identity theft and reducing the limits on his cards and then finding this out about paying off the balance but I can't find that now.

And Eric J just posted one post about it

BUT I cannot find this documented anywhere - by companies or regulators

Anyone have any links to official sources that admit this ?

[metalman]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

that this happens in any official publication

Gary North wrote an article about being scared of identity theft and reducing the limits on his cards and then finding this out about paying off the balance but I can't find that now.

And Eric J just posted one post about it

BUT I cannot find this documented anywhere - by companies or regulators

Anyone have any links to official sources that admit this ?

"Deadbeats" pay their balances off in full every month.

[Spartacus]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

From the last time I asked for help with this I've searched several times but still don't have a source that admits it -

This was the article I mentioned (Rajiv found it last time I asked this question)
http://www.garynorth.com/members/1183.cfm

But I'm very surprised this information is not more easily found.

that this happens in any official publication

Gary North wrote an article about being scared of identity theft and reducing the limits on his cards and then finding this out about paying off the balance but I can't find that now.

And Eric J just posted one post about it

BUT I cannot find this documented anywhere - by companies or regulators

Anyone have any links to official sources that admit this ?

[Spartacus]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

Here's the type of thing I'm looking for

on this page
http://www.myfico.com/Downloads/Brochures.aspx#uycs

this document
http://www.myfico.com/Downloads/File...FS_Booklet.pdf

page 11

Whether you are showing a balance on certain types
of accounts. In some cases, having a very small
balance without missing a payment shows that
you have managed credit responsibly, and may
be slightly better than carrying no balance at
all.

_____________________

suspicious language though, IMHO - why so many qualifiers?

[FRED]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

Here's the type of thing I'm looking for

on this page
http://www.myfico.com/Downloads/Brochures.aspx#uycs

this document
http://www.myfico.com/Downloads/File...FS_Booklet.pdf

page 11

Whether you are showing a balance on certain types
of accounts. In some cases, having a very small
balance without missing a payment shows that
you have managed credit responsibly, and may
be slightly better than carrying no balance at
all.

_____________________

suspicious language though, IMHO - why so many qualifiers?

"There is another way that credit card use can negatively affect your credit score, even if you pay off your credit card balances every month. Suppose that you use your credit card to purchase gas, groceries, and everything else each month, always spending around $1,500 each month, but when the bill arrives, you pay the balance in full. One would think you would get bonus points for staying out of debt and paying off the balance in full each month, but not when you consider how you look on paper. What is your credit card issuer reporting to your credit report each month -- the total amount you owe at the time of the report and that you pay on time, not the fact that you pay your balance in full each month. Therefore, on paper, it looks like you carry a $1,500 balance on your credit card and never pay it off. Therefore, a good idea would be to have 2 or 3 credit cards and rotate them, using one for a few months, then using another, so that your credit card company can report a zero balance every few months to the three credit reporting agencies."

How Credit Cards Affect Your Credit Score

[jk]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

"There is another way that credit card use can negatively affect your credit score, even if you pay off your credit card balances every month. Suppose that you use your credit card to purchase gas, groceries, and everything else each month, always spending around $1,500 each month, but when the bill arrives, you pay the balance in full. One would think you would get bonus points for staying out of debt and paying off the balance in full each month, but not when you consider how you look on paper. What is your credit card issuer reporting to your credit report each month -- the total amount you owe at the time of the report and that you pay on time, not the fact that you pay your balance in full each month. Therefore, on paper, it looks like you carry a $1,500 balance on your credit card and never pay it off. Therefore, a good idea would be to have 2 or 3 credit cards and rotate them, using one for a few months, then using another, so that your credit card company can report a zero balance every few months to the three credit reporting agencies."

How Credit Cards Affect Your Credit Score

this passage implies that it is best to have zero balances. it says the problem is showing big balances, not that you are penalized for paying in full each month.

[zoog]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

"There is another way that credit card use can negatively affect your credit score, even if you pay off your credit card balances every month. Suppose that you use your credit card to purchase gas, groceries, and everything else each month, always spending around $1,500 each month, but when the bill arrives, you pay the balance in full. One would think you would get bonus points for staying out of debt and paying off the balance in full each month, but not when you consider how you look on paper. What is your credit card issuer reporting to your credit report each month -- the total amount you owe at the time of the report and that you pay on time, not the fact that you pay your balance in full each month. Therefore, on paper, it looks like you carry a $1,500 balance on your credit card and never pay it off. Therefore, a good idea would be to have 2 or 3 credit cards and rotate them, using one for a few months, then using another, so that your credit card company can report a zero balance every few months to the three credit reporting agencies."

How Credit Cards Affect Your Credit Score

this passage implies that it is best to have zero balances. it says the problem is showing big balances, not that you are penalized for paying in full each month.

I didn't see this new thread when I responded to the original question post by Spartacus here. I linked the same Frontline that metalman referenced in this thread, and noted my FICO scores have been more than acceptable despite paying my credit card(s) off every month.

This link from Fred explains the situation to me. Since the system is only reporting the balance each month, and since my typical monthly balances are relatively small compared to my credit limits, this appears to have a positive, or at least neutral, effect on my score.

[Spartacus]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

thanks for all the responses.

Fred's link is a good catch on how the mechanics of the rating can be gamed a little bit, it's not an industry admission that paying the balance off lowers the score.

Metalman and Zoog's reply is good too, but it is hearsay.

[raja]

Re: HELP - regularly paying off credit reduces credit score - I can't find any admiss

Perhaps I can shed some light on this issue . . . .

I have never borrowed money.
I always pay off my credit card balances each month.

I just checked my credit rating: PLUS Score is 783 on a scale of 330 - 830.
"Your credit rating ranks higher than 94.60% of U.S. consumers."

However . . . to cloud the issue a bit . . . .
There was one small exception to my paying off balances, and I don't know how this affected my credit rating.

. . . . about two years ago my car got towed, and I had to use my credit card as a debit card to pay the towing fee. The card carried about a $10 unpaid balance for about 5 months, which was the debit use fee. For some ridiculous reason I couldn't pay off this charge on my card by paying off the balance, and I even offered to send them an extra check. To solve it, they said I had to not use my card for two cycles. It was some sort insane Catch-22.
I yelled at them a few times and finally some senior agent who agreed with me that the situation was insane went against company policy and somehow took off the $10 amount.