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muckymucks
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Registered: ‎10-08-2011
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Is keeping a balance on a credit card required for my credit score to increase?

Is keeping a balance and making high payments required for my credit score to rise or can I have a zero balance and have the credit card still work for me? I've heard both work but I'd like a definitive answer. I figure if anybody knows it'll be this community.
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-Cain-
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Registered: ‎04-06-2011
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Re: Is keeping a balance on a credit card required for my credit score to increase?

You want to have some activity on the card for best results. Let a small balance report and pay off after statement cuts. If you keep a zero balance, it doesn't look like you're using the credit.

Starting Score: EQ 681 5/2011, EX 656 6/2011 (PSECU), TU98 642 6/2011
Current Score: EQ 741 12/2011, EX 734 11/2012 (PSECU), TU98 695 9/2012
Goal Score: 725+ across the board


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muckymucks
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Registered: ‎10-08-2011
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Re: Is keeping a balance on a credit card required for my credit score to increase?

Thanks, -Cain-, that makes sense. I have another question but I don't want to flood the board so I'll continue here. If I make a second payment before the next billing cycle will the credit card company count it as another payment made for the upcoming month? Let's say my due date is today, so I make a payment. Then next week I make another payment. When the next due date comes up will it count that second payment as the current payment or will it ask for another one?
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-Cain-
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Registered: ‎04-06-2011
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Re: Is keeping a balance on a credit card required for my credit score to increase?

[ Edited ]
After your due date? Good question, I'm sure someone else will chime in.

Starting Score: EQ 681 5/2011, EX 656 6/2011 (PSECU), TU98 642 6/2011
Current Score: EQ 741 12/2011, EX 734 11/2012 (PSECU), TU98 695 9/2012
Goal Score: 725+ across the board


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Meltdownblitz
Posts: 374
Registered: ‎06-01-2011
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Re: Is keeping a balance on a credit card required for my credit score to increase?

[ Edited ]
If I'm understanding you correct, that would count as an "extra payment" doesn't count as your next payment if you pay ahead unless your account says payment due and you pay then you are paying a payment. Any other payment until a payment is actually due would be considered an "extra payment". Hope this helps, someone correct me if I'm wrong.
 
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llecs
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Registered: ‎08-04-2007
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Re: Is keeping a balance on a credit card required for my credit score to increase?

OP, FICO has zero memory of your balances and utilization. It doesn't matter if you have no balance or if you are maxed out at 100%...months from now FICO won't remember that and they'll only score you based on your reported balances at that moment in time. IMO, PIF monthly but as mentioned, do show activity from time to time just to keep them from closing it. I personally would recommend using it every 4-6 months, and shelving it for the rest. Or use it monthly. Your call. But either way, FICO has no memory of your CC util  and only cares what your balances are at that moment your score is pulled. For best results per scoring, get all CCs to report $0 but one and get that one to report a balance of under 9% of the CL.

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Odiseous
Posts: 288
Registered: ‎03-08-2011
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Re: Is keeping a balance on a credit card required for my credit score to increase?

 

muckymucks wrote:
Is keeping a balance and making high payments required for my credit score to rise or can I have a zero balance and have the credit card still work for me? I've heard both work but I'd like a definitive answer. I figure if anybody knows it'll be this community.

 

Carrying a balance is *not* required to build credit. I have yet to pay a dime of interest on my CC bills; and have gone from zero credit, to the 700 club in 2 years. 

 

Showing usage, and that you can use credit responsibly is. 

 

For FICO scoring purposes, it's usually best to have 1 CC reporting 1-9% utilization when the statement cuts; and all other CCs reporting zero balance. 

 

But, that's pretty much only really an issue; if you are looking for new credit, and need to optimize your current score. If you accidentally PIF for all of your cards one month, before the statements cut; you can let one report the next month, and your score bounces back those few points. 

 

There are 2 parts of 'showing usage': 

1) Showing other creditors you are able to use credit (1-9% utilization) on one card when the statement cuts, is ideal

2) Using your cards, to keep them from being closed for inactivity

 

For item 2; you can use the card, then PIF before the statement even cuts. You simply have to use the card every once in awhile; to keep it from being closed.

 

The exception (for ideal FICO scores); is if you only have one card. If that's the case; let it report 1-9%, then PIF before the due date. 

TU98 751, EQ 766, EX 766 (Lender)

If at first you don't succeed; Garden for 6 months, then try again.

Work the system. Don't let the system work you.
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Odiseous
Posts: 288
Registered: ‎03-08-2011
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Re: Is keeping a balance on a credit card required for my credit score to increase?


muckymucks wrote:
Thanks, -Cain-, that makes sense. I have another question but I don't want to flood the board so I'll continue here. If I make a second payment before the next billing cycle will the credit card company count it as another payment made for the upcoming month? Let's say my due date is today, so I make a payment. Then next week I make another payment. When the next due date comes up will it count that second payment as the current payment or will it ask for another one?


No.

 

When your statement cuts, that's when they figure out how much your minimum payment is. Any payments made before the statement cuts, simply reduces the total owed (and reduces any residual interest, if you are carying a balance). 

 

If you make the required payment, then make a second payment before your next statement cuts; you still need to make another payment after the next statement cuts. 

TU98 751, EQ 766, EX 766 (Lender)

If at first you don't succeed; Garden for 6 months, then try again.

Work the system. Don't let the system work you.

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