Carry a small balance on CC for credit rating?

[HipGnosis]

I'm FIRE.   I haven't had a loan other than mortgage for years.

Would carrying (leave) a balance due for a cpl months on a credit card help with my credit rating?
How much balance should I carry over?

[Stimpy]

I'm FIRE.   I haven't had a loan other than mortgage for years.

Would carrying (leave) a balance due for a cpl months on a credit card help with my credit rating?
How much balance should I carry over?

Carrying a balance doesn't do squat for you.  I've been paying off my CC for years and never had a balance carry over and always see an upward trajectory on my CR. 

It's truly a myth that carrying a balance does anything for you.  It does LOTS for the credit card companies, but nothing for you.

[Telecaster]

Balances actually hurt your score because part of your score is based on available credit.  If you have a balance you have less available credit.  The thing to do is use your card and even open more cards.

[zolotiyeruki]

None.  Carrying a balance does nothing for your credit history.  A history of on-time payments helps you.  Low credit utilization (i.e. your average balance is way below your available credit) also helps you.

[bacchi]

What they said ^^

Also, what's reported to the credit agencies is your end-of-statement-period balance. It doesn't show what's carried over.

[MissNancyPryor]

The algorithms are notoriously guarded and mysterious so there is not a perfect answer.  I agree that using a low percentage of available credit is good, as well as having a good length of credit history.  Generally having "too many" lines of credit, especially if you open more than one line of credit at once, are negatives. 

I have a couple credit cards for convenience that are paid off monthly.  I use only 4% of my available credit at any one time and have a score over 800.  No other debt of any kind.  I have over 30 years of credit history which counts too.  I think my report shows something like 11 lines of credit available but I only use 2.   

Last summer I opened a HELOC while FIREd because my house is debt free and I had brokerage statements showing wealth accumulation.  The bank was confused and asked for a lot of explanations on how I survived without a j.o.b. but in the end they accepted it.  Manual underwriting.     

I guess if you don't anticipate needing a loan then why bother (cue Dave Ramsey).  If you are wanting to keep a high score to be able to breeze past pre-employment screenings (except you are FIRE) and have good insurance rates then keeping it tight is good with just a couple open lines and low usage that is paid off in full-- carrying a balance does not seem to boost anything, I have not carried balances in at least 20 years. 

Side note, in my state they outlawed the use of credit scores for insurance rates and OF COURSE the unintended consequence is that all rates were increased.  The company sent a letter saying that is why the rates went up, of course that is what was going to happen.  Great job again, guv mint.             

[terran]

I have never had a car loan, had student loans that were paid off just after school finished, had a mortgage but no longer do as I'm currently renting, and pay off my credit cards in full every month and my credit score is over 800, so I don't think it's necessary to either have multiple types of loans or to carry a balance to have a more than adequate credit score. My wife has basically the same credit profile with similar results.

[Arbitrage]

What they said ^^

Also, what's reported to the credit agencies is your end-of-statement-period balance. It doesn't show what's carried over.

Yes, this.  If you use your credit card regularly, you always have credit utilization, even if you pay your balance off in full every month. 

[Dicey]

I posted about this story in the forum olden days. My brother had a higher credit score than me, but I had a higher NW, which kind of irked me. The only difference I could see was that he had car payments. My local Credit Union was offering loans for dirt cheap. I took in my pink slip and got me a shiny car loan, with 36 equal payments.

Then a bunch of other stuff happened in very short order: I started dating a guy I'd known for a long time, and we eloped. We each sold our house for metric craptons of money to buy a very expensive new one together, for which we ended up paying cash. Oh, and I FIRE'd. By the time the dust settled, I had made payments on that car loan for about a year, so I just said "fuckit" and paid it off. I didn't care about my credit score any more.

Together, our NW has skyrocketed, but my credit score is still lower than my brother's...because he keeps buying brand-new cars. We've replaced the vehicle that I took the loan out on, but we paid cash for a used, but much newer one. It's now eight years old and we still think of it as our "new" car.

Story the second: I used to work retail commission sales in Men's Clothing. When the black Amex cards were introduced, I knew they were based on spending habits, not NW. When a customer had one of those, it told me they were status-conscious spenders and it changed the way I sold to them. They only saw the best goods, and plenty of them. Point: if you're chasing credit scores to get fancier credit cards, it could cost you in ways you'd never imagine.

IMO, beyond a certain point, chasing a higher credit score isn't worth it.

[Dave1442397]

My score in Credit Karma hovers around 822-830, but PenFed seems to be permanently stuck on 850.

[solon]

The balance on your credit card when the month ends is what gets reported to the credit agencies. Then you have 20 days until the due date. Whether you pay the whole balance or just part of it doesn't get reported to the credit agencies.

Conclusion: use your card a little each month and pay it off in full before the due date. Not paying it off in full won't get you anything, and will cost you some interest.

[seattlecyclone]

Side note, in my state they outlawed the use of credit scores for insurance rates and OF COURSE the unintended consequence is that all rates were increased.  The company sent a letter saying that is why the rates went up, of course that is what was going to happen.  Great job again, guv mint.             

Sounds like a convenient scapegoat for a rate increase they would have made anyway.

I'm very skeptical of the use of credit scores for any purpose other than granting credit. A person's history of paying loans on time has no obvious causal connection to their likelihood of getting cancer or crashing their car or having their house burn down. Why then should it affect their insurance premiums? Perhaps credit history is correlated with insurance risk. If that's the case you'll probably find if you drill down deeper that there's some underlying cause (i.e. poverty) that can explain both the lower credit scores and the higher insurance risk.

[sonofsven]

My anecdotal experience was that having a high-ish balance due (think $1k) and paying it off before the billing cycle when it would be due did increase my credit score from the low 800's to the mid 800's. Say the billing cycle covers March 1 to March 30, and your bill is due April 15. Paying off the balance before March 30 is what I'm talking about. I don't know if this is always true, but my score did go up. I wasn't trying to make it go up, just impatient :)
For the past few years I've been churning cards and bank accounts and now my credit score is mid 700's.

[Telecaster]

Side note, in my state they outlawed the use of credit scores for insurance rates and OF COURSE the unintended consequence is that all rates were increased.  The company sent a letter saying that is why the rates went up, of course that is what was going to happen.  Great job again, guv mint.             

Sounds like a convenient scapegoat for a rate increase they would have made anyway.

I'm very skeptical of the use of credit scores for any purpose other than granting credit. A person's history of paying loans on time has no obvious causal connection to their likelihood of getting cancer or crashing their car or having their house burn down. Why then should it affect their insurance premiums? Perhaps credit history is correlated with insurance risk. If that's the case you'll probably find if you drill down deeper that there's some underlying cause (i.e. poverty) that can explain both the lower credit scores and the higher insurance risk.

Mine didn't go up, so I don't really buy that story either.   I can see that people with poor credit history might be more likely to miss an insurance payment.  But lots of people have low credit scores for perfectly good reasons.  Don't like to use credit, short credit history, credit problems due to illness etc. that have no real correlation to risk.   These people get jacked for no fault of their own.   

[Telecaster]

My anecdotal experience was that having a high-ish balance due (think $1k) and paying it off before the billing cycle when it would be due did increase my credit score from the low 800's to the mid 800's. Say the billing cycle covers March 1 to March 30, and your bill is due April 15. Paying off the balance before March 30 is what I'm talking about. I don't know if this is always true, but my score did go up. I wasn't trying to make it go up, just impatient :)
For the past few years I've been churning cards and bank accounts and now my credit score is mid 700's.

I don't really churn credit cards, I open and close maybe 2-3/year.   But the effect on my credit has been imperceptible. 

[yachi]

The balance on your credit card when the month ends is what gets reported to the credit agencies. Then you have 20 days until the due date. Whether you pay the whole balance or just part of it doesn't get reported to the credit agencies.

Conclusion: use your card a little each month and pay it off in full before the due date. Not paying it off in full won't get you anything, and will cost you some interest.

This.  Sign up for creditkarma and you can see some of the information the credit ratings get to see.  If you wait till your credit card bill arrives and paying the statement balance, you're doing it the best way.  Credit card companies will report the statement balance, and whether it was paid as agreed or not.  As long as you pay everything off by the due date, you incur no interest costs.  If instead you leave even $10 unpaid, all your next month's purchases begin to add to your interest charges as soon as you charge them. 

[kpd905]

@HipGnosis what is your credit score now and why do you want to increase it?