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I'm Soooo Confused About How To Use My Credit Cards...

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Anonymous
Not applicable

I'm Soooo Confused About How To Use My Credit Cards...

I have recently been approved for a few department store cards with limits beween $200 - $300. I am happy because at one point the only thing I got from department stores were denials... So I am proud to be considered for credit, albeit a small amount, it's a new start for me.

 

I have been online reading tons of forums and articles about using your credit wisely and after reading so much I am really starting to confuse myself.

 

Some posts state that if you have a card and keep it at a zero balance, you aren't improving your credit at all. Other posts state that you should use your cards monthly (small purchases) and pay the balances off in full before the due date. And I've also read some that say you should leave a small balance on your account every month in an effort to improve your score.

 

So many things, so many conflicting suggestions, I just don't know what to do.

 

So currently, my $300 Kohl's card is at a zero balance (unused to be exact) and my other 2 cards by WFNNB are basically untouched as well. My objective (like everyone else's) is to rebuild my credit...

 

I also have been recently approved for an Orchard Bank Gold (unsecured) card with a $320 credit limit, as well as a CapitalOne (secured) MasterCard with a $200 credit limit. BOTH untouched and not even activated at this point.

 

Can anyone advise me on how to use these cards to the best of my interest to rebuild my credit.???

How much and how often should I use them? Do I pay in full every month? Or do I leave a small balance? Am I hurting my credit when I use $150 of a card with a $200 credit limit (even though I pay it off in full every month)? Can someone break down the basics for me? I would appreciate any accurate information available.

 

~Thank You~

Message 1 of 15
14 REPLIES 14
Woolfman
Established Contributor

Re: I'm Soooo Confused About How To Use My Credit Cards...

The best i can tell you is on a $200 card .. dont let more than like 16-18 dollars be on it when the statement cuts. This will give you the around 9% that fico likes. But IMO just use the cards here and there. Pay them in full before the statement cuts. You do get score bumps by letting less than the 9% utility report(generally). But just having the cards and letting them age is the true way to increase your scores. I dont think its ever worth a credit score to pay interest if you dont have to. 

 

Generally if you keep a small amount on the card till the statement cuts then pay it in full . You will never pay interest. The card will generally report the statement balance giving you the affect of showing usage.  Keep the utility low , pay on time and let them age for 6 months or so and you will be surprised how many other cards you will have available to you.

Message 2 of 15
Anonymous
Not applicable

Re: I'm Soooo Confused About How To Use My Credit Cards...


@Woolfman wrote:

The best i can tell you is on a $200 card .. dont let more than like 16-18 dollars be on it when the statement cuts. This will give you the around 9% that fico likes. But IMO just use the cards here and there. Pay them in full before the statement cuts. You do get score bumps by letting less than the 9% utility report(generally). But just having the cards and letting them age is the true way to increase your scores. I dont think its ever worth a credit score to pay interest if you dont have to. 

 

Generally if you keep a small amount on the card till the statement cuts then pay it in full . You will never pay interest. The card will generally report the statement balance giving you the affect of showing usage.  Keep the utility low , pay on time and let them age for 6 months or so and you will be surprised how many other cards you will have available to you.


Thank you very much!!! Smiley Wink

Message 3 of 15
MarineVietVet
Moderator Emeritus

Re: I'm Soooo Confused About How To Use My Credit Cards...

Hi LoveandLife and welcome to the Forums.

 

Everyone's situation is different and there is no one size fits all approach to this but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Message 4 of 15
gpeach
Regular Contributor

Re: I'm Soooo Confused About How To Use My Credit Cards...

Having been where you were at this point I have some advice I think will be helpful. You have a good mix of cards. You should not apply for more till your scores are high enough to get you cards you really want. 
 

Reasons:

Every inquiry counts against your score for one year. So too many lowers score.

Once your score is better too many inqiries may cause you to get declined.

Too many small accounts is more to manage. Easier to make errors. 
You need to age your accounts. If you keep adding more accounts your average will not increase. 

 

Now for using the cards if you are not needing to maximize your score for a goal then all you need to do is make sure you do not go overlimit and pay on time. Being that you have low limits I would recommend using less than 50% of your line. To avoid a accidental overlimit. I would not worry about reporting balances and such at this time. Don't stress yourself out. For example I had a secured Bank of America for 3 years. I had been wanting to get it unsecured. So a month in advance I made sure that I paid off everything right before my statement posted so that my utility was low. Helped my score 50 points. Got it unsecured and went from 300 to 2500 limit. But normally I don't stress about the details. 

 

If you have a goal in mind like car, house, etc.... Just post on the boards and people will be happy to give you advice on what they have done in your situation. I started out on this board because we wanted to buy a house. We got a house. But  what we needed to do to maximize our fico score helped to get in great overall financial shape. No debt, low interest rates on car/house, savings......Wish they taught this stuff to me in school!

Message 5 of 15
Anonymous
Not applicable

Re: I'm Soooo Confused About How To Use My Credit Cards...

Hi LoveandLife,

 

 I think I see where some of your confusion may be.

 

From what I understand there's no need to pay interest for the <9% utilization score optimization. As long as you pay the amount after the stament cuts and before the due date.

 

For example the last CC statement cut I recieved was on 4/12/2011 but the due date wasn't until 05/09/2011 so I had almost a full month to pay my balance down before I was hit with any interest charges. Hope this helps.

Message 6 of 15
Anonymous
Not applicable

Re: I'm Soooo Confused About How To Use My Credit Cards...

I agree with what everyone has posted.

 

I was in your situation last year at this time, I apped for a Cap1 in June and another Cap1 in Sep, then in Dec I apped for a Discover, declined but counter offered an HSBC Discover Direct and lastly a GEMB PayPal Smart Connect in Dec as well, was approved for all of them. Total avail CL was 2150.

 

I used each card every month, mainly my Cap1 No Hassle Rewards Cash CC, and I shopped a lot on Ebay, using my GEMB PayPal card as well, I used the other two for just small purchases throughout the month, I paid 3 of the 4 CC's to 0 two to three days before the due date and left a small balance on one, normally the basic Cap1 for util purposes (usually somewhere around 150 which kept me around 7% util) at that time 7% seemed to maximize my scores, any lower util my scores would drop by a few points (yes weird) but that's what Fico liked me at. Then I would pay that 150 the day after the billing cycle closed (A good tip is to pay the CC's you're going to PIF a few days before the due date and do not use the cards again till after the statement closes) For example, AmEx due date is the 14th and the closing date is the 20th, I PIF on the 12th leaving a zero balance, and if I use the card on the 17th, for some reason AmEx will report the amount I charged on the 17th. So basically I can't use my AmEx between the dates of the 14th and the 20th if I want it to report a zero balance on my reports, I have not noticed this with any other CC I have, however its best to pay in full a day or two before the due date and not use the CC till a day after the due date.

 

Then in Feb of this year, I asked my Father to add me as an AU on his AmEx opened in 1984 with a 16,000 CL (he pays in full every month), and once that showed up on my reports it raised my total avail reliving credit from 2150 to 18,150 and also raised my scores 25 points because it raised my AAoA from 2 to 5 yrs. So now for me util is not a problem because I always PIF all my CC's except one.

 

In March I applied for an AmEx Blue Cash and was approved (2000CL, bringing my total avail reliving credit to 20,150) So now I use my AmEx as my primary CC and just to keep two of my other 4 CC's active, I put my FreeCreditReport.com subscription on my Cap1 CC and on my HSBC I put EQ's monitoring service and also MyFico's ScoreWatch, I had to use those two cards for this purpose because of the date the payment is due and the due dates on my CC's, I had to make sure I would have plenty of time to make the payments on these two CC's before they reported, so they would report a 0 balance on my credit reports each month. As far as the other two CC's I will use them for small purchases every month or every other month just to show activity and PIF 3 days before the due date.

 

It's a bit of a challenge to have 6 CC's and try to use them all and PIF the ones you want and remembering the due dates on them all (I have everything written on my calendar hung on my wall and I have it all memorized at this point) so I never forget to make my payments on time. I still get a little flustered at times, but this process seems to work best for me.

 

Like others have said to you, use your CC's (however you want monthly, but be sure you can PIF all of them except one, leaving a small balance @ 9% or less of that CC's avail CL and then after the closing date pay it in full) you do not have to keep a <9% util if you're not concerned with maximizing your scores at this point, but if you are, that's the way to do it.

 

I sure hope all or any of this makes sense to you, I sure could have left out like 90% of what I just typed, but I just wanted to try and give you as much info as I could to possibly help you.

 

Best of Luck!!!

 

And BTW, Congratulations on the new CC's!!

 

 

 

 

Message 7 of 15
Anonymous
Not applicable

Re: I'm Soooo Confused About How To Use My Credit Cards...

 If my score was lower and I was borderline to getting approved I would do it, as I did when I first got my Amex. Other than that, I would just check my util before I applied for new credit and if it wasn't where it was at I would wait till next month...

 

Overall though, you can keep those department cards for a year and a half, all the while gardening, and then come out and get approved for a great card by that time.

Message 8 of 15
Anonymous
Not applicable

Re: I'm Soooo Confused About How To Use My Credit Cards...

Thank you for welcoming me, and thank you ALL for the feedback! I appreciate it... Smiley Happy

Message 9 of 15
Anonymous
Not applicable

Re: I'm Soooo Confused About How To Use My Credit Cards...

I understand, and I appreciate the break-down of what you said. It is helpful and I am completely new to this so I appreciate the 90% that you said you could have left out...Smiley Very Happy

 

~Thanks Again~


@Anonymous wrote:

I agree with what everyone has posted.

 

I was in your situation last year at this time, I apped for a Cap1 in June and another Cap1 in Sep, then in Dec I apped for a Discover, declined but counter offered an HSBC Discover Direct and lastly a GEMB PayPal Smart Connect in Dec as well, was approved for all of them. Total avail CL was 2150.

 

I used each card every month, mainly my Cap1 No Hassle Rewards Cash CC, and I shopped a lot on Ebay, using my GEMB PayPal card as well, I used the other two for just small purchases throughout the month, I paid 3 of the 4 CC's to 0 two to three days before the due date and left a small balance on one, normally the basic Cap1 for util purposes (usually somewhere around 150 which kept me around 7% util) at that time 7% seemed to maximize my scores, any lower util my scores would drop by a few points (yes weird) but that's what Fico liked me at. Then I would pay that 150 the day after the billing cycle closed (A good tip is to pay the CC's you're going to PIF a few days before the due date and do not use the cards again till after the statement closes) For example, AmEx due date is the 14th and the closing date is the 20th, I PIF on the 12th leaving a zero balance, and if I use the card on the 17th, for some reason AmEx will report the amount I charged on the 17th. So basically I can't use my AmEx between the dates of the 14th and the 20th if I want it to report a zero balance on my reports, I have not noticed this with any other CC I have, however its best to pay in full a day or two before the due date and not use the CC till a day after the due date.

 

Then in Feb of this year, I asked my Father to add me as an AU on his AmEx opened in 1984 with a 16,000 CL (he pays in full every month), and once that showed up on my reports it raised my total avail reliving credit from 2150 to 18,150 and also raised my scores 25 points because it raised my AAoA from 2 to 5 yrs. So now for me util is not a problem because I always PIF all my CC's except one.

 

In March I applied for an AmEx Blue Cash and was approved (2000CL, bringing my total avail reliving credit to 20,150) So now I use my AmEx as my primary CC and just to keep two of my other 4 CC's active, I put my FreeCreditReport.com subscription on my Cap1 CC and on my HSBC I put EQ's monitoring service and also MyFico's ScoreWatch, I had to use those two cards for this purpose because of the date the payment is due and the due dates on my CC's, I had to make sure I would have plenty of time to make the payments on these two CC's before they reported, so they would report a 0 balance on my credit reports each month. As far as the other two CC's I will use them for small purchases every month or every other month just to show activity and PIF 3 days before the due date.

 

It's a bit of a challenge to have 6 CC's and try to use them all and PIF the ones you want and remembering the due dates on them all (I have everything written on my calendar hung on my wall and I have it all memorized at this point) so I never forget to make my payments on time. I still get a little flustered at times, but this process seems to work best for me.

 

@Like others have said to you, use your CC's (however you want monthly, but be sure you can PIF all of them except one, leaving a small balance @ 9% or less of that CC's avail CL and then after the closing date pay it in full) you do not have to keep a <9% util if you're not concerned with maximizing your scores at this point, but if you are, that's the way to do it.

 

I sure hope all or any of this makes sense to you, I sure could have left out like 90% of what I just typed, but I just wanted to try and give you as much info as I could to possibly help you.

 

Best of Luck!!!

 

And BTW, Congratulations on the new CC's!!

 

 

 

 



Message 10 of 15
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