leanordjenkis

Keeping a balance on credit cards

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Hi, everyone.

I have a question. Should I keep a low balance on credit cards or should I pay them off? What's better for your score? The cards in question are sub-primes and store cards that I recently obtained. This question has always bugged me.

BTW, I WANT TO THANK EVERY SINGLE ONE OF YOU!

My last item was just recently deleted I finally have a clean record! For the first time in ten years. Also, I'll be completely debt-free in the next two months. My scores three months ago were high 500's to low 600's and now 2 out of 3 are over 700 with the other one almost there!

Thank you all!

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Which score?

The FICO "sucker score"...the one that says "here's a sucker that the CCs can make money off of by charging interest and occasional late fees"...will actually go up if you carry a balance. "Utilization" should be about 20-30%.

The FICO mortgage score will improve if your CC balances are zero.

The FICO new car score doesn't care much one way or the other.

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Well, if you carry a balance you pay finance charges. Why pay extra for, potentially, a few more points on your FICO?

I'm sure someone who actually plays the FICO game will come in and let you know what percentage is best to maximize your score, but my advice is and will always remain to pay in full monthly and never charge anything you don't have money for right this second. You can own credit cards and use them responsibly to maintain a good credit rating or you can be owned by credit card debt. The latter is a slippery slope that you don't often realize you're on until it's too late. To me it's just not worth the risk for a few more FICO points.

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Great post, that one!

Your goals are relative to context of your life. Different tactics need to be employed for different times. In the 6 mos prior to obtaining a mortgage loan you may wish to keep utilization between 1% - 9%. As wtg stated, the scoring programs geared toward the auto industry place little emphasis on utilization. And CC companies will obviously be extremely concerned with HOW you manage that type of debt. So it all depends on who you are applying to, if indeed you are applying for credit right now at all.

If you don't need credit for awhile, manage CC debt in a frugal manner regardless of the impact on your score. When you need a high score, adjust according to what, exactly, you are applying for...

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Great post, that one!

Your goals are relative to context of your life. Different tactics need to be employed for different times. In the 6 mos prior to obtaining a mortgage loan you may wish to keep utilization between 1% - 9%. As wtg stated, the scoring programs geared toward the auto industry place little emphasis on utilization. And CC companies will obviously be extremely concerned with HOW you manage that type of debt. So it all depends on who you are applying to, if indeed you are applying for credit right now at all.

If you don't need credit for awhile, manage CC debt in a frugal manner regardless of the impact on your score. When you need a high score, adjust according to what, exactly, you are applying for...

Well, the truth is that all my credit cards are at 0 balance. And I am in fact trying planning to shop for a new car in two months or so. What exactly does the auto industry scoring programs focus in on?

Just really trying to figure this out before I go shopping and I thought a higher score (keeping small balances on CC's) would mean lower interest rate.

Am I completely off here?

Thanks!

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As I understand it, the new car FICO is more concerned with their "hassle factor" than with your actual credit managment. Do you have any repos? BKs? Judgements? The car loan is a secured debt, so they're pretty sure they'll get their money back (one way or the other)...what they're looking for is how much hassle they're likely to have go through to get it. A 0% loan through a car company (e.g., Chrysler Credit) is likely to want no derogs on your reports. A loan through HSBC will charge you more interest, but they're willing to take on more hassle.

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"...auto industry scoring programs focus..."

As willing said BEACON Auto Enhanced, and others, focus on how you have managed auto related debt. Secondary to that is how you have managed other installment loans. There's not really much you can do to raise your auto industry skewed-score than to have paid those types of loans on time. I wish you luck!

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Thanks for all the responses!

I've never bought a car before but I have had secured loans which I have paid. I have one derogatory on Ex and one on TU but they're the same thing; a debt that was charged off but now rehabbed and paid off.

Looks like I'm just going to have to roll the dice here.

Thanks again!

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