Is PIF all its cracked up to be?

For just about anything you want to get off your chest about credit cards.
18 posts
CardySark
Green Member
Green Member
 
Posts: 12
Joined: Sat May 03, 2014 6:56 pm
Location: Orange County, CA

Is PIF all its cracked up to be?

Postby CardySark » Wed Dec 10, 2014 9:35 pm

Wanted to see what you guys think.

I got my first card about a year and a half ago and was always told to PIF and avoid carrying a balance like the plague. Well that changed about 4 months ago after a shopping spree at Bloomingdale's and an unexpected maintenance issue with my car. I've been carrying a balance that ranges between 15 and 20% of my card limit since then and my TU FICO has actually increased.

So is PIF really that crucial or am I lucking out here somehow?


User avatar
CarefulBuilder14
Centurion Member
Centurion Member
 
Posts: 4447
Joined: Thu May 08, 2014 7:42 pm
Location: United States

Postby CarefulBuilder14 » Wed Dec 10, 2014 9:54 pm

It is true that you will have lower FICOs if you have no card reporting any balance at all. But I think you're confusing carrying a balance with letting a balance report. For example:

Say you have a statement that opens Dec. 1 and closes Dec. 31. The payment is due Jan 20th. You don't actually buy anything after Dec. 29, to keep things simple here.

If you pay off all your purchases on Dec. 30th, then your reported utilization is 0%. This will hurt your FICOs little, but you don't pay any interest. This is sometimes simplest, and often desirable when you have many cards you use every month.

If you pay off most of the purchases on Dec. 30th, and the rest on Jan. 10, you let a small balance report and you don't pay interest. This is letting a balance report. This is the best of both worlds. You're paying within the grace period - which all cards but some really crummy subprime cards have. You also show you're using the credit.

But say you don't pay the card off in full by Jan. 20th. You have the same FICO boost as you do from letting a balance report, but you're paying interest. This is a bad idea. This is carrying a balance. Prospective future lenders may be uneasy about the fact that you're not paying in full, since it makes you look like you're at risk of default.

You only need to have one card report a small balance to optimize your FICOs. I have 6 cards. If 5 of them report a balance, my FICOs are lower than if just one reports.
Warranties and sketchy merchants: Schwab Platinum
Price rewind: Costco
Travel insurance: Prestige, CSP
Perks: IHG, Hyatt
Rewards/Offers: Discover, Freedom, ED, BCE
Taxes/Misc: SPG

Limited value, might close: Arrival

Might add: First Tech, proper business card

User avatar
PlyrStar93
Centurion Member
Centurion Member
 
Posts: 410
Joined: Wed Jun 04, 2014 1:06 pm
Location: Chicago

Postby PlyrStar93 » Thu Dec 11, 2014 1:37 am

Like what CarefulBuilder14 said. It is the reported balance that affect your score, and "carry a balance" is not the same thing to "have a balance".

Carry a balance - basically you are going to pay some amount owed in multiple billing periods (not including the one when you charged the amount).
Pay in full - pay whatever you owe showing on the statement by the due date.

You can have an amount owe shown on the statement, and pay at least that amount by the due date which is also shown on the statement, and that is considered pay in full. By doing so, you can "have a balance" reported without "carrying a balance".

The fact your FICO increased is because of having a low percent utilization, which is better than 0% overall utilization or high utilization. To achieve such increase, there is no need to "carry a balance".

You are awarded score not for carrying balance and/or paying interest, but actually having an amount owe that is not too much showing on credit report. You were penalized not for paying in full, but rather having zero amount owed showing on the report.
Citi Forward Visa $5000 10/2012 | American Express Blue Cash Everyday $8000 2/2014 | Discover it $7000 5/2014
Chase Freedom Visa Signature $7000 6/2014 | Citi ThankYou Premier Visa Signature $5000 1/2015
All EMV.

thom02099
Centurion Member
Centurion Member
 
Posts: 476
Joined: Sat Apr 13, 2013 7:49 pm
Location: Colorado, USA

Postby thom02099 » Thu Dec 11, 2014 9:50 am

The advice and information given above is excellent. Can't really add much more to that perspective.

I can, however, offer just a bit of a different perspective. What was stated above is particularly true with folks beginning their credit journey. If one is just starting out, or has a somewhat thin file, then the advice above matters.

When one has a thick/very thick file, and long credit history, this seems to matter a bit less, at least with some of us. As someone who's gone from the 500s scores to now over 800, I can tell you that, letting multiple balances report and carrying multiple balances has less of an effect at 800 then it does at 700. I've done both, at both score ranges. In the 700s, when I used the standard (allowing a 1-9% util range report), I had my best score increases. And letting m
Retired, and in the process of retiring cards!
EQ = 850 EX=849 TU = 850 as of 07/2017

takeshi
Centurion Member
Centurion Member
 
Posts: 1741
Joined: Wed Jun 05, 2013 3:12 pm
Location: US

Postby takeshi » Thu Dec 11, 2014 9:55 am

CardySark wrote:I've been carrying a balance that ranges between 15 and 20% of my card limit since then and my TU FICO has actually increased.

So is PIF really that crucial or am I lucking out here somehow?

It's not simply whether or not PIF is "all its cracked up to be or not" and you're assuming causality where it doesn't exist.

PIF'ing for one thing is done to avoid the accrual of interest. If one is playing the rewards game then PIF'ing is a must as interest will kill rewards.

As for scoring considerations, utilization is the second biggest factor (Amounts Owed):
http://www.myfico.com/crediteducation/whatsinyourscore.aspx

However, it's not the only factor -- note all the other slices in that pie. It's certainly possible to have a score increase despite increased utilization. It's really a matter of how all the various factors involved add up. However, lower utilization will generally lead to better scoring. That said, there is a diminishing point of returns and you'd have to determine where that point lies specifically for your credit profile.

It's possible that you could see significantly better scores with lowered utilization. It's possible that you could see a negligible improvement or no improvement at all. Again, we can't say for certain for you. You'd have to adjust your reported utilization and monitor the effect.

The general recommendation is "only one balance reporting at 10% or less for optimal scoring". I've found that my score is just fine even with most of my cards reporting balances. I have some with intro offers so they are carrying balances but none of them exceed 30% and overall is typically around 10%. My scores for the most part tend to straddle ~800. Could they be higher with lower utilization and less balances reporting? Possibly but I'm fine with them where they are. I guess my point is that the guidelines are just guidelines and you really have to see how the various factors specifically affect your credit and where you want to draw the lines.

oldsoldier
Centurion Member
Centurion Member
 
Posts: 119
Joined: Mon Nov 17, 2014 5:34 pm
Location: TN

Postby oldsoldier » Thu Dec 11, 2014 1:29 pm

If you pay off most of the purchases on Dec. 30th, and the rest on Jan. 10, you let a small balance report and you don't pay interest.


Maybe I am missing something here. If the closing date is the 31st wouldn't the statement that comes out say on the 3rd with that reporting balance have the interest on it?

Meaning your balance due would report interest.
BoA Cash Rewards $13,000
Chase Sapphire Preferred $14,000
BoA Better Balance $12,000
Amex Every Day $24,000
Discover It $19,000
NFCU Cash Rewards $25,200
Barclay Arrival WMC $10,000
Cap One QuickSilver WMC $7,200
WF Cash back Visa Sig $11,000
Citi Thank You Premier $13,500

User avatar
CarefulBuilder14
Centurion Member
Centurion Member
 
Posts: 4447
Joined: Thu May 08, 2014 7:42 pm
Location: United States

Postby CarefulBuilder14 » Thu Dec 11, 2014 1:50 pm

oldsoldier wrote:Maybe I am missing something here. If the closing date is the 31st wouldn't the statement that comes out say on the 3rd with that reporting balance have the interest on it?

Meaning your balance due would report interest.


Most cards (except for some horrid subprime ones) have a grace period. There is no interest charged if you pay within the grace period - usually about 3 weeks after the statement closes.

If you don't pay within the grace period, then you can pay interest retroactively to the date of your purchases.
Warranties and sketchy merchants: Schwab Platinum
Price rewind: Costco
Travel insurance: Prestige, CSP
Perks: IHG, Hyatt
Rewards/Offers: Discover, Freedom, ED, BCE
Taxes/Misc: SPG

Limited value, might close: Arrival

Might add: First Tech, proper business card

User avatar
Vattené
Centurion Member
Centurion Member
 
Posts: 1219
Joined: Sun Jan 26, 2014 3:55 am
Location: US

Postby Vattené » Thu Dec 11, 2014 2:57 pm

I'll skip the points already made and just say that, for me personally, even if carrying a balance DID result in higher FICO scores it would still be worth it to PIF. I would gladly give up some FICO points to avoid paying interest charges. What is a high FICO score good for, anyway? Letting you borrow money you otherwise wouldn't be able to at terms better than you could otherwise get. Paying interest on credit cards would totally offset the benefits of having a higher FICO, but again these are just my preferences. Having a credit line that allows you to go on a little shopping spree may well be worth the interest charges for you.
-Vattené
FICO-8: EX - 827 (5/17) | TU - 824 (5/17)
My Cards: Barclay Arrival+ | Discover it | Amex ED
AU:: Discover Miles | BofA BBR | Barclay Commence (SD'd)

CardySark
Green Member
Green Member
 
Posts: 12
Joined: Sat May 03, 2014 6:56 pm
Location: Orange County, CA

Postby CardySark » Thu Dec 11, 2014 5:50 pm

Thanks you guys cleared up a lot of misconceptions that I had.

Basically what I did was rack up around $2,000 in debt between shopping for new clothes and taking care of my brakes, rotors, and control arm bushings. I paid off around $1,200 the day my statement posted, but have been spending between 600-1000 a month after that. My statements post between 800 and 1,500 but I've been paying between 500-800 on the day it posts, so a smaller amount is reported... I was just confused thanks. I believe my utilization is around 10-15% at the moment.

To those talking about interest charges: I get what you're saying, it just eats up the points but luckily I'm still within my 0% interest for 15 months window from AMEX. I will definitely try to zero it out by then and spend more responsibly, but also like Vattene mentioned, I love having access to the money and I could live with a little interest here and there.

User avatar
Vattené
Centurion Member
Centurion Member
 
Posts: 1219
Joined: Sun Jan 26, 2014 3:55 am
Location: US

Postby Vattené » Fri Dec 12, 2014 10:12 am

Oh, if you're in a 0% purchase APR period that changes things. No interest to worry about, then, so the only factor to consider is the impact on your FICO score (even so, I wouldn't worry about it too much unless I would be applying for a mortgage soon). The ease on your budget alone might make it worth not paying in full.

I just got an Amex myself, but I'm still planning to always PIF. I just don't want to get in the pattern of carrying a balance only to find myself struggling to start PIF again when I need to. I am also doing it in case that helps me with a CLI a few months later when the time comes (not that I even need it...it's just too easy to get caught up in the milking-every-point-out-of-FICO-you-can game).
-Vattené
FICO-8: EX - 827 (5/17) | TU - 824 (5/17)
My Cards: Barclay Arrival+ | Discover it | Amex ED
AU:: Discover Miles | BofA BBR | Barclay Commence (SD'd)



Return to “General Credit Card Talk”

Who is online

Users browsing this forum: No registered users and 3 guests