Credit Reports Will Now Show If You Pay Your Balances In Full Each Month

A recent change by major credit rating agencies will enable mortgage lenders to see whether you pay off your bill every month or keep a balance. That means home buyers who pay off their credit cards may earn an advantage when looking for a mortgage. This might be bad news for those who always pay in time but carry a balance, but should be good news for most readers since I assume you all pay your balances in full.

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Previously, lenders would base their decision on information such as total debt and whether you were on-time with your payments. But two of the major credit rating agencies, Equifax and Transunion, began offering what’s known as “trending data” in September. With this change, lenders now see how much someone paid off each month on those accounts over the past two years. And obviously they may reward those who regularly pay more than the minimum on revolving debts or pay them off in full.

Experian, is also expected to begin offering trending data soon.

But do you really have less of chance at defaulting on a loan if you pay your balances in full each month? Apparently so. Fannie Mae found that all other things being equal, borrowers who paid off their credit card every month were 60 percent less likely to become delinquent than borrowers who make only the monthly minimum payment.

Paying your balances in full is in no way a guarantee that you’ll be approved for a loan, but it will play a small role in the approval process. This will be one more reason to pay your bills in full each month.

Read more at AP.

Want to learn about how to improve your credit score? Read more here:

3 thoughts on “Credit Reports Will Now Show If You Pay Your Balances In Full Each Month

  1. Why do you think the banks will favor those who pay in full each month – can’t earn 18% interest off those people.

    • Those paying 18% interest every month have lower credit lines and are more likely to default, and also are making fewer transactions.

      Those who pay off high balances every month mean that the bank is making 1-3% every month on that amount in transaction fees. That’s at least 12-36% a year on higher balances.

      $3000 credit limit at 18% makes them roughly $630 including transaction fees.

      A person who spends $5000 every month and pays it off in full makes them $1800 in the same year.

  2. this is great news for most of us. I never understood how it was enough to just pay min balance and look like a great borrower to a bank

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