Credit gurus....payment question

[zachary]

Well the bump came in and it was pretty small for the last bit of payment.
went to 804 after the last and final 3k of debt was paid off.

which is all great but i do work in the oilfield and maybe unemployed and homeless in sub six months...so

[jluv]

I paid off the last of my debt at the end of Feb. Mine went up a little each time I paid a big chunk on stuff, except for my truck. I paid off the last $2900 on it at the end of Feb and it brought my score down two points because the credit union closed the account. Bastards. It was only two points, so I can't be too mad, but it still irks me a little.

So, now I've got several cards with a zero balance. I know not to close them out. Is there any advantage or disadvantage to using them a little and keeping a small balance on them? I like them being at zero, but could use them for small stuff if it's gonna help my score. Or, if I'm going to make a big purchase, like a vacation or truck parts, should I put it on a card first and then pay it off immediately? Would any of that help my score at all?

[zachary]

a 0 balance card will not help you. charge and pay in full each month before interest hits.

[TeeShock]

I started buying my necessities with credit cards about a year ago and it has inflated my score a lot. Gas, groceries, gym memberships, etc. are all things I have to pay for anyways why not use a credit card at no charge. I pay them off bi monthly.

[Big A]

If possible, move any auto-drafts from your bank to your cards, such as car payments, utilities, phone, etc., and then pay them off each month. That make for a set of recurring charges and payments that you've already budgeted for, you just need to get in the habit of taking that extra step each month to pay the balance.

It kinda defeats the purpose of the auto-draft, but should help that score rise.

[chronical]

If possible, move any auto-drafts from your bank to your cards, such as car payments, utilities, phone, etc., and then pay them off each month. That make for a set of recurring charges and payments that you've already budgeted for, you just need to get in the habit of taking that extra step each month to pay the balance.

It kinda defeats the purpose of the auto-draft, but should help that score rise.

Most people don't realize that by paying with a debit card, you are not legally protected against unauthorized purchases. Some banks may refund the money back to you immediately or after a pending investigation. Some banking institutions will just stick you with the bill and there is nothing you can do. All purchases should be made with a credit card since you are protected by federal law against unauthorized purchases. Not to mention the perks such as an additional year extended warranty on purchases which is pretty automatic with prime lenders. With that being said, you can't pay an installment loan such as a vehicle payment or mortgage payment with a credit card. There are "work arounds" and exceptions but, for the most part, that is the standing policy. I did pay my TT&L with my Amex Platinum card for the spend requirement though.

[chronical]

Also, in case there was some confusion, your credit score does not benefit simply by using the card. The benefit comes from the length of time you have had the card open and the closing balance of the card in relation to your overall credit limit as a single trade line and as a total of balances on all cards in relation to total credit limits. If you had no credit history and opened x amount of cards and never used them for a year, your score would be the same as if you charged them all heavily and paid in full. (before the statement closed)

[jluv]

Also, in case there was some confusion, your credit score does not benefit simply by using the card. The benefit comes from the length of time you have had the card open and the closing balance of the card in relation to your overall credit limit as a single trade line and as a total of balances on all cards in relation to total credit limits. If you had no credit history and opened x amount of cards and never used them for a year, your score would be the same as if you charged them all heavily and paid in full. (before the statement closed)

You might as well be speaking Japanese to me. What do you mean by closing balance? In my situation, with 5-6 cards with zero balance, ranging from $1000 to $10000 limits, does it benefit me to use them some or just leave them at zero? I don't need to use them for anything, even big purchases, but I could if it will help my score. And if that's the thing to do, how long do I let them carry a balance? Is it okay to pay them off the next day, or should I wait a month or two? Is there a proven formula?

[chronical]

You might as well be speaking Japanese to me. What do you mean by closing balance? In my situation, with 5-6 cards with zero balance, ranging from $1000 to $10000 limits, does it benefit me to use them some or just leave them at zero? I don't need to use them for anything, even big purchases, but I could if it will help my score. And if that's the thing to do, how long do I let them carry a balance? Is it okay to pay them off the next day, or should I wait a month or two? Is there a proven formula?

I always specify closing balance because some people don't understand that the balance that is on their statement when the billing cycle closes, is the amount that is reported to the 4 major credit bureaus. (Experian, Equifax, TransUnion, and Innovis) Yes there are 4 major bureaus but most lenders do not use Innovis. So if you have a $10,000 credit card limit and rack up $9000 in charges, wait to get your bill in the mail or set your account for auto pay and pay it the day it is due, the credit card company still reported you as having a $9000 balance. This is important because utilization accounts for 30% of your score.
Here is a link to FICO's page explaining utilization.

http://www.myfico.com/crediteducation/articles/fico_scores_credit_limit.aspx

So if you are constantly charging your card, and then letting the statement cut, then paying your credit card in full, then all of those balances are reported each month and it would appear as if you arent paying them down and your score would continue to suffer due to the reported utilization.

Anything over 50% of limit is extremely taxing on your score and really anything over 75-80% will be considered essentially maxed out. That number may be as high as 90% so don't quote me on exactly 75-80%.
30-40% will be scored fair
20-30% will be scored as ok
10-20% will be scored as good
1%-9% will yield the best possible score for a person's credit file.
0% scores the same as 10-20%

What this means, is if a person is currently at 20% utilization and has a credit score of 775, they would see incremental score increases as they decrease their utilization all the way down to 1%.
That same person will have a higher score with 1% utilization than if they had 0%.

Also, the various FICO models penalize us for having more than one card carrying a balance.

With all this being said, it doesn't mean that one can not have a good credit score without paying in full before their statements cuts and letting 1% report on one card and having $0 balances on all the others. It just means their score could be even better if they danced to FICO's tune.

Hope this helps

[jluv]

I always specify closing balance because some people don't understand that the balance that is on their statement when the billing cycle closes, is the amount that is reported to the 4 major credit bureaus. (Experian, Equifax, TransUnion, and Innovis) Yes there are 4 major bureaus but most lenders do not use Innovis. So if you have a $10,000 credit card limit and rack up $9000 in charges, wait to get your bill in the mail or set your account for auto pay and pay it the day it is due, the credit card company still reported you as having a $9000 balance. This is important because utilization accounts for 30% of your score.
Here is a link to FICO's page explaining utilization.

http://www.myfico.com/crediteducation/articles/fico_scores_credit_limit.aspx

So if you are constantly charging your card, and then letting the statement cut, then paying your credit card in full, then all of those balances are reported each month and it would appear as if you arent paying them down and your score would continue to suffer due to the reported utilization.

Anything over 50% of limit is extremely taxing on your score and really anything over 75-80% will be considered essentially maxed out. That number may be as high as 90% so don't quote me on exactly 75-80%.
30-40% will be scored fair
20-30% will be scored as ok
10-20% will be scored as good
1%-9% will yield the best possible score for a person's credit file.
0% scores the same as 10-20%

What this means, is if a person is currently at 20% utilization and has a credit score of 775, they would see incremental score increases as they decrease their utilization all the way down to 1%.
That same person will have a higher score with 1% utilization than if they had 0%.

Also, the various FICO models penalize us for having more than one card carrying a balance.

With all this being said, it doesn't mean that one can not have a good credit score without paying in full before their statements cuts and letting 1% report on one card and having $0 balances on all the others. It just means their score could be even better if they danced to FICO's tune.

Hope this helps

So if I'm hearing you right, I should keep a balance of 1-9% on each of my cards for the best possible score.

[chronical]

So if I'm hearing you right, I should keep a balance of 1-9% on each of my cards for the best possible score.

Just one card. And a couple bucks will suffice. The rest should have a zero balance

[jluv]

Just one card. And a couple bucks will suffice. The rest should have a zero balance

Ah, one card? Cool. That's good. Less hassle.

Does it matter which one? Should I use the one with the largest limit, smallest, somewhere in between?

Thanks for the info.

[chronical]

If it's just a few dollars, then it doesn't matter. If you carrying a few hundred or more, use the biggest limit

[jluv]

If it's just a few dollars, then it doesn't matter. If you carrying a few hundred or more, use the biggest limit

Cool, thanks again for the advice.

[Hmbre97]

What I've found works best for me is using one card for all my purchases and keep all others at a $0 balance. When the due date rolls around, I pay it off in full. Between the payment due date and statement date, things that were pending will then post to the account. As long as you don't make any large purchases in those few days, the small balance that posts on the statement should keep you in that 1-9% range, especially if your cards have larger limits.