Credit Tips: How Does Having a Full Credit Card Balance Affect My Credit Score

Posted On: October 1, 2006

Author: maverick
Posted: Tue Nov 09, 2004 8:26 am
Post subject: Question about carrying balances

I had a question regarding carrying balances on my credit cards. I could carry balance on two of my credit cards. Both of them have a credit line of about $10,000. Now, if I want to carry a balance of about $10,000, what will look better on my credit report/score: Having about $10,000 on one single card or carrying 5,000 on each of those?

Author: Polonius
Posted: Tue Nov 09, 2004 10:13 am
Post subject:

The second approach is better. You lose points in most credit scoring models if you are near the limit on a card. The breakpoints seem to be at the dectile figures. 49% utilization on a card produces a better score than 51% utilization; 50% is one breakpoint.

I’m basing that comment on the credit score simulator for Experian at PrivacyGuard.com. You can run all sorts of simulations there to see how to distribute your payouts for maximum score. It’s $1 for two months of service, a great deal as long as you remember to cancel via phone before the two months are up.

Author: mouse
Posted: Tue Nov 09, 2004 10:30 am
Post subject: Re: Question about carrying balances

maverick wrote:
I had a question regarding carrying balances on my credit cards. I could carry balance on two of my credit cards. Both of them have a credit line of about $10,000. Now, if I want to carry a balance of about $10,000, what will look better on my credit report/score: Having about $10,000 on one single card or carrying 5,000 on each of those?

What are the interest rates???

F.I.C.O. DOESN’T PAY THE BILLS

If one card at $10,000 is 0.00% and the other card at $0.00 is 9.99%
Keep what you have.

If they are real close and you can do it without a major fee…split them up

You also could get some more back-up cards (like one or two that you don’t use very often)—ANOTHER $10,000 or $20,000

Author: Dave
Posted: Thu Nov 11, 2004 9:09 pm
Post subject: How Does Having a Full Credit Card Balance Affect My Credit Score

I definitely agree with mouse — Ultimately, the score isn’t the most important thing at all, so long as you don’t sink low enough to scare your creditors into cutting back your available credit. Consider the cost to you for that credit, first and foremost, particularly if you’re not in need of that ‘great score’ right away for something big.

Something to be aware of: Your scores change constantly as information is reported/updated by your creditors.

If you aren’t going to seek out new credit (especially long term stuff like a mortgage or even a car loan), it may not matter at all how you divide up that balance so go with whatever costs you less in the long run. If those are your only two cards and they were previously paid in full, you may find your score ’suddenly’ suffers tremendously just by carrying a balance on both, especially if it’s a substantial portion of the credit line. (You’ll take a hit for many accounts with a balance and the percent utilization….) The flip side of it is that you could pay off the balance in full a short time before seeking out new credit and have your score jump tremendously once those zero balances post. This is a good argument for some unused backup cards — they can lessen the fluctuations as you use credit (by contributing positively to your utilization and the number of accounts with balances) if it is important to you to have a great score at all times.

Just FYI, different creditors have different policies regarding how frequently they update the bureaus. If you do try to raise your score ‘at the last minute’ by paying your balances in full, you’ll need to check your reports to ensure that you’ve got what you want showing before you apply for something important. Of course, all of this assumes that you don’t have any more weighty issues in the forefront like recent late payments, etc.