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Old 03-24-2004, 09:39 AM   #17 (permalink)
NoSoup
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Location: Green Bay, WI
Re: Re: Re: Improving credit score

Quote:
Originally posted by jujueye
This fascinates me, and I have heard it before, but I still don't understand how leaving a balance on a card is better than paying it off and having a zero balance. When I have applied for mortgages, or when I was out shopping for them, i would pay off major cards prior to meeting with the lender, and my credit scores seemed good. Could you explain?
Sorry for the delay, I hadn't checked back in a couple of days...

Basically, credit history is exactly that - history of payments being made. If you pay your card off in full, you may not actually show a history of a payment that month. I'll explain - Generally, credit cards report to the credit reporting agencies one time per month, to give a "snapshot" of your current financial situation. They report your balance, payment, highest amount ever borrowed, credit limit, if you are delinquent, ect.

If, however, you happen to have charged up your card and paid the balance in full before it reports, it will actually show a zero balance, therefore leading others to think that it was not used. It is also important to avoid borrowing on the card until it is near maxed out, because they will keep track of the highest amount you have ever borrowed, which, in turn, will affect your score.

I hope this clears up any questions... if you have any more, feel free to post them on the "Ask the Loan Officer" thread, as I usually check that daily... or at least try to
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