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How to BEST use the cards to maximize scores?

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Anonymous
Not applicable

How to BEST use the cards to maximize scores?

Ok, so I now have 3 cards (2 store, 1 Cap1 QS1). My DH also has a QS. We had been using the QS like a debit card and just paying it in full every month, but I noticed on CK it said my utilization was too high because we would spend too much. (It's only a $300 card) 

 

We're rebuilding so I want to use the cards the best way I can.

 

So, is it better to carry a small balance, pay off in full every month, or pay off before the amount spent posts to CR? 

 

For example right now on my CR it says I have a $200 balance on the card, but that's not accurate because we paid it a few days before the due date.

 

And the 2 store cards are lower limits ($350 and $250). The VS one I could see spending a smaller amount ($30-$50) but the other one I could EASILY use $200 in one purchase. But that's bad? Even if I pay it off?

 

I guess I just don't understand why it's bad to use the credit that's been extended to you, especially if you pay it off in full?

 

I could MAYBE understand if you're using 10K or more a month and don't have a high enough income to pay that off every month, but with lower limit cards, why does it count against you? 

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Anonymous
Not applicable

Re: How to BEST use the cards to maximize scores?

You don't have to pay interest, so you don't have to carry a balance.  Just let a small amount go to statement and then pay it off (if you want to make multiple payments throughout the month, that's cool too, but let a little go to statement).

CK is going to tell you utilization is high if it's over 30% (IIRC - I may be off by a couple percent).  Utilization doesn't have a memory so you can get rid of that quote-unquote negative flag from CK rather quickly - with a $300 card just let $90 or less go to statement and it'll fix.  So if you max it out, just pay $210 or so right before the statement cuts, then pay the rest off after the statement cuts and bam - low utilization and no interest Smiley Very Happy

Message 2 of 4
takeshi74
Senior Contributor

Re: How to BEST use the cards to maximize scores?


@Anonymous wrote:

So, is it better to carry a small balance, pay off in full every month, or pay off before the amount spent posts to CR?  


You never need to carry a balance for scoring purposes.  The advice is to let a small balance report.  Report and carry are two entirely different things.

 


@Anonymous wrote:

 

For example right now on my CR it says I have a $200 balance on the card, but that's not accurate because we paid it a few days before the due date. 


The report is accurate.  You may have not paid early enough for the balance to adjust prior to reporting or you may have had charges post that increased the reported balance.  It's not the due date that matters.  It's the date that your account reports.  Most cards report on statement date.

 


@Anonymous wrote:

And the 2 store cards are lower limits ($350 and $250). The VS one I could see spending a smaller amount ($30-$50) but the other one I could EASILY use $200 in one purchase. But that's bad? Even if I pay it off? 


All that matters is the reported balance.  You can use all you want and pay it off prior to reporting if you don't want a balance to report.

 


@Anonymous wrote:

I guess I just don't understand why it's bad to use the credit that's been extended to you, especially if you pay it off in full?


It's because revolving utilization is considered a significant risk factor.  It falls under Amounts Oweed below.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

 

General advice is do not exceed 30% utilization.  Your reported balances are used to determine your revolving utilization.  "Pay in full" doesn't necessarily mean that you have a 0 balance reporting.  Again, most cards report on statement date so if you have a balance on that date then that balance gets reported.  It doesn't matter if you pay in full after that date since the balance has already been reported.  If you want to reduce or eliminate the reported balance then you have to pay before the date the balance is reported and ensure that othe charges and fees do not affect that balance.

 


@Anonymous wrote:

I could MAYBE understand if you're using 10K or more a month and don't have a high enough income to pay that off every month, but with lower limit cards, why does it count against you? 


Look at the link I provided above and note the slice for income.  Revolving utilization is balance(s)/limit(s).  Income is not relevant.  You can argue against how it's all assessed but the system is what it is.

Message 3 of 4
xerostatus
Regular Contributor

Re: How to BEST use the cards to maximize scores?

This might be essentially repeating what others already mentioned, but put it more concisely which might be easier to follow:

 

In order to play the "utilization"-game to maximize your score(s), you need to understand four things: Due Date, Statement Date, Statement Balance, and Current Balance.

Your actual "spending" has really very little to do the reported "statement" balance which appears on your reports (and hence, affects your scores).

 

First of all, never pay interest, always pay "at least" the statement balance in full before due date.

In order to control your reported balance(s) on your credit reports, pay CURRENT BALANCE in full before statement (that is, for 0% reporting).

 

This way, it doesn't matter whether you use 0% or 100% of your limits throughout the statement period AS LONG as you pay the full (current) balance owed before the statement "cuts" to make sure it reports as "$0" balance.

 

Make sure all revolving accounts (credit card accounts) report 0% ($0 balance reported), except 1 card. Let that report a 1% (or less, it'd round up to the nearest-whole percent). Not "9%," or "5%," or any thing else you might hear.

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