Credit Card Debt in Board Package

Your credit card "balance" is the amount you owe at the end of the month. If you use a credit card but pay it off right away, your balance is zero.

Where your always-paid-off monthly usage really does count is in "utilization": that is, what percentage of your credit line you make use of. So if your credit line is $5000 and you spend $500 per month using CCs, your utilization is 10%, which is low and will help improve your credit score. This will show up on your credit report and will count against you if you're using your entire credit line every month.

You should put $0- you have no revolving credit card debt. But you are correct that this is not discernible from a credit bureau report because banks report the BALANCE due when your bill is cut or "your account cycles" in industry parlance. Board members will also know this. But by the same token I would not by a $25k watch in the few months leading up to closing (even if you will pay it off right away). If you want to mitigate the risk of an incompetent board you could temporarily switch your spending to a debit card since bureaus have no view of debit cards. Then again if the board is not competent you have bigger worries.

@Triple - you are correct with the caveat that if a person has say a $5,000 line and spends $4,500 each month and pays the full balance every month this will severely adversely affect FICO. This is why store cards (e.g., Barneys, Macy's) - with their low credit lines - are often very bad for one's FICO score.

Nonsense. I have $2400 limit on my cc and use it all every month and pay total on the due day and my fico score went up from mid 500 to mid 700.

Bernie, that's a good point: your FICO score will drop even if you don't use your full line of credit. There must be an inflection point somewhere where using credit starts to hurt you; does anyone know what it is? The lower your utilization, the better, as long as it isn't zero (which does nothing for your score). Playing this game well, I've seen my credit score go sky high in this past year thanks to a very high credit line and very little utilization: on one card, I can spend up to $11,000, but I only use it for the occasional $5 iTunes purchase. My other card has a credit line of $5,000, and I use about $300 per year: only for Amazon and occasionally for groceries.

It's stupid, but this is how the game is played, so you might as well exploit how the system works. @1sttimenycbuyer, it looks like you're doing great and your FICO score will be high, just as long as you're not using too much of your credit line. Did you get a good mortgage rate? With a zero balance, you have perfect credit as far as the board is concerned.

Thanks. I just do not want the board to think I am hiding anything by putting "0" but I also don't want to put down debt that no one counts as debt either.

FWIW, when i submitted my board package I had the same question. I typically spend $4-$5k/month on my Amex and pay off every month and put $0, because it's revolving credit and there is never a carried balance. As stated above, board members will understand this.

If you want to be safe, which is what I ultimately did to keep my credit score up before refinancing, make several payments throughout the month to keep your balance super low, like in the low hundreds...low utilization but ability to keep using your card for purchases.

@1sttimenycbuyer - There is *nothing* suspicious about having a balance of zero. Paying off one's credit card in full every month is the epitome of prudence.

most people pay off their balances every month, not an item to look at

@Scorpion: certainly paying on time is a huge portion of one's credit score but FICO IS a multi-variate score. It sounds to me like your score would improve even more if you didn't bump up against the credit line regularly thus making your utilization on that account really high. After all, a 700 score is considered prime but you still have a lot of room for improvement to get the super-prime cut-off of 750. This is where you start getting the best rates.

@Triple: you're right. I don't know FICO's algorithim but the bank I work for uses variables like this:

A = absolute value (# spend active accounts - 4 )
B(i) = utilization on each account from i=1, 2, ... N where N is total number of accounts
D = overall utilization

The final score uses these and other variables. In this simplified model you'd want 4 active accounts but all with low utilization. But the real model has more variables... In any case it sounds like you are gaming the FICO algorithm quite well!

@1sttimenycbuyer - I ALSO has the same exact question when submitting my coop package.

@Scorpion - my bad, I misread your post. If you are at mid 700's already well that's just about superprime. Still, the logic I described is true. Your score might go toward 800 with lower utilization like Triple_Zero describes. Again FICO score with lots of variables.

Bernie, my details are like this: Utilization under 1% on one card, and 0.1% (!) on the other, paid in full every month, and my credit score was 813 when I had a mortgage rep investigate it last October. I was over the moon when I heard that number. 1sttimebuyer, see if you can get your credit line increased, but lower your utilization and start paying cash for more things. Jump through the hoops!

Stop worrying. Cash in the bank, average income for the last three years, ability to easily meet all expenses including mortgage and maintenance from your monthly income, and other assets including stocks less debt matter far more.

"@Triple - you are correct with the caveat that if a person has say a $5,000 line and spends $4,500 each month and pays the full balance every month this will severely adversely affect FICO. This is why store cards (e.g., Barneys, Macy's) - with their low credit lines - are often very bad for one's FICO score."

This is why our board has stopped putting so much weight on FICO scores in applications.

Thanks everyone for you advice. Triple_zero - 30 year is approx 3.75% now.

1sttimenycbuyer: I just locked Chase today at 3.50%....

Matsonjones. Thanks for the info. Do you have a banker there that you would recommend?

1sttimenycbuyer:

She was really great. Highly recommend. The rate was significantly better (and cheaper) than a reliable mortgage broker whom I also asked to offer their best shot....

Ms. Desaree Ethridge
Mortgage Loan Officer
530 Fifth Avenue
New York NY 10036
Email: Desaree.C.Ethridge@Chase.com
Office: 212-696-3108

Talk to a pro or contact debt settlement firms like debtconsolidationcare or 2DebtConsolidation.

Thank you