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Valued Contributor
FinStar
Posts: 5,156
Registered: ‎10-21-2012
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Re: Maxing out Credit Card then Paying in Full?

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longtimelurker
Posts: 5,947
Registered: ‎04-22-2013
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Re: Maxing out Credit Card then Paying in Full?


killer_queen229 wrote:

1. I don't see anything wrong with how I pay my credit card bills. It works for me, right? Then thats all that should matter. It takes a few days to almost a week for the money order to actually get to it's location that it needs to go to.

 


I agree but gave an opinion.  Similar to when you said, for example:  "Either way it is bad to max out a card, even close to it even if you pay in full. Never do that.  To a creditor it looks like you can max out a card with the possibility of not paying it back. I wouldn't recommend doing it even if someone disagrees."  

Most active cards: Amex BC ($50K), Cap One QS ($33K) Fidelity Amex ($20K)
Others: CSP, Freedom, Chase Amazon, Cap One QS, Penfed Plat Rewards (x2), Citi TY Preferred, Citi Dividend, Citi AA Plat Select, Citi Forward, Amex BCE, Amalgamated Bank, Sallie Mae, Cash Plus
Scores May 14: EQ 848, EX 833, TU 841 (Jul)
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indiolatino61
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Registered: ‎11-10-2012
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Re: Maxing out Credit Card then Paying in Full?


andiruleu wrote:

Hello,

 

I'm new to this forum, and I hope this is in the right place for this question.

 

I was wondering if it is bad to pay for something in your credit card that will almost max it out, but pay the credit card in full right after? I'm doing this to so I can rack up points on my credit card. I know that its only good idea to use 1/3 of your credit limit. But in this case, if I decide to pay my credit card back in full say the next day or even right after the purchase, is it bad?

 

Thanks


My first card was the Cap1, and I was new to credit rebuilding. I also thought that maxing out a card and paying in full was a "good" thing. Perhaps internally it is, but as far as FICO scores go, mine never went up until I started paying before the statement close, so as not to show a balance. It is quite difficult to not max out a $300 or $500 CL card, so I had to pay multiple times since I only had the one card. FWIW, that's my experience.

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longtimelurker
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Re: Maxing out Credit Card then Paying in Full?


indiolatino61 wrote:

andiruleu wrote:

Hello,

 

I'm new to this forum, and I hope this is in the right place for this question.

 

I was wondering if it is bad to pay for something in your credit card that will almost max it out, but pay the credit card in full right after? I'm doing this to so I can rack up points on my credit card. I know that its only good idea to use 1/3 of your credit limit. But in this case, if I decide to pay my credit card back in full say the next day or even right after the purchase, is it bad?

 

Thanks


My first card was the Cap1, and I was new to credit rebuilding. I also thought that maxing out a card and paying in full was a "good" thing. Perhaps internally it is, but as far as FICO scores go, mine never went up until I started paying before the statement close, so as not to show a balance. It is quite difficult to not max out a $300 or $500 CL card, so I had to pay multiple times since I only had the one card. FWIW, that's my experience.


Yes, there are at least two measures that are impacted differently.  FICO score is maximized by not reporting large balances, and this matters if you are apping from new issuers or possibly getting CLIs from existing ones.   However, as discussed in other recent threads, it seems plausible that  maxing and PIF shows the issuer of that card that you a) need more credit and b) are reliable at paying off debt.

 

Counter-examples both ways (people who don't get CLIs and those that do on cards they hardly use) make it hard to evaluate!

Most active cards: Amex BC ($50K), Cap One QS ($33K) Fidelity Amex ($20K)
Others: CSP, Freedom, Chase Amazon, Cap One QS, Penfed Plat Rewards (x2), Citi TY Preferred, Citi Dividend, Citi AA Plat Select, Citi Forward, Amex BCE, Amalgamated Bank, Sallie Mae, Cash Plus
Scores May 14: EQ 848, EX 833, TU 841 (Jul)
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JediNeo
Posts: 220
Registered: ‎11-22-2013
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Re: Maxing out Credit Card then Paying in Full?

Well I usually use my card as needed. Then make a prepayment before the bill is cut to ensure my reported utilization is low. Actually I keep it around 1% but I think I need to let it more report to get CLI increase later.
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jgodfrey82
Posts: 88
Registered: ‎09-24-2013
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Re: Maxing out Credit Card then Paying in Full?

I would just like to add that even though I am currently practicing the safer utilizations talked about above. Unless you are trying to maximize scores for building new key accounts it really shouldn't matter to you how quickly you pay and what exaxt dates. Pay ontime, use the credit they give you and pay as qucikly as possible. Credit is a financing tool and why have it unless you can use its leverage?

The last time I felt I was at a comfortable place, where I knew I was not trying to app or even cared what the lenders thought, I had no problems using my cards very close to limits for short periods of time, including statement cut dates and even balance carries. I run a small business and financing is very important, I always keep backup plans, but I would have no problem using your limits and exhibiting your ability to pay. They make money when you swipe and when you pay interest, period. Credit report wise, the answer is different but dont be afraid to pay the bank some fees, everyone wants their backs scratched.
Staying in the garden for at least another 3 months.. only issues with my reports are too many INQ, once those are gone, I should be able to get any card on the market
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ReaLiLJ
Posts: 143
Registered: ‎09-17-2012
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Re: Maxing out Credit Card then Paying in Full?

[ Edited ]
cashnocredit wrote:

Normally I would let the balance report even if it's near the CL. I would prepay if one or more of the following conditions exist:
1. If my balance history on CCs doesn't show high usage and PIF. This is easily seen on manual review and some banks may automate this.

Relevate  wrote:
This is what I do.  I subscribe to the theory that having a high balance set, and a low current balance, is about as good as it gets from a reporting standpoint.  
 
The reported credit card limits (many cards never used to) and now reported payments directly on the credit report obviate this, but personally I know it's more than a risk analysis, it's a profit one from a lender perspective... and I want to show them not only responsible use of my cards, but also heavy use as well.

Man I thought I was the only 1!!!!        
Edit: +3 lol I saw that (Highest Balance) Amount categorey on experian awhile back, and from what I learned from here when you pay in full and don't Pif) it looks like your not using the card. So I combined both of this newfound knowledge together, and I saw that when I do Pif, what I charged to the card during the month (the entire balance before I pay it off doesn't report) so "I lose that how much I spend a month factor" with other lenders and it's good, but only when I'm trying to get a history going with that lender only . But the consequence is you lose that factor of other lenders knowing what you actually charge to the card monthly, as those transactions/balance is not sent to those lenders. So instead of losing that factor, to keep it in motion, and relevant, I do exactly this and let the maxed out balance or close to the CL report, for the first month, and immediately after send a payment right after the statement post (so the lender who I maxed out the card with, knows I am responsible and can pay them back) but I let that high balance report, so when I apply for other cards or ask for Credit Limit Increases, or recon for higher starting limits, 6 months later or further down the road: I not only have my cards reporting at 1%, but I can justify that I ran the balance all the way up, as they can see in that high balance categorey, but I also paid it down in full. And you can say you spend close to that on a monthly and pay in full or however you want to use that factor now that you have that factor and you can use that as leverage to fight for a high credit limit, or use that to get you approved for a cc application that you probably would of been denied for, or use it for a higher starting line (i.e. when chase trys to start you at $200 or $500 on your freedom) because now it is documented in the CB reports, and not only that, but since it is not updated you can manipulate it however you want, to be in your favor during this process. (Hope you understand what I mean by all of this)

So kudos to @revelate and @cashnocredit as I feel this does work, and glad I am not the only one who uses this method.

Be warned: Only do this if you have the money tucked away, as I've seen this fail due to emergencies coming up, and people have to use that readily available cash on the emergency instead of applying it to the maxed out principle balance -.- so YMMV but on recons it really really helps! 


 

andiruleu wrote:
I was wondering if it is bad to pay for something in your credit card that will almost max it out, but pay the credit card in full right after? I'm doing this to so I can rack up points on my credit card. I know that its only good idea to use 1/3 of your credit limit. But in this case, if I decide to pay my credit card back in full say the next day or even right after the purchase, is it bad?

 
 
 
@andiruleu Futhermore, to chime in and add to everyone else's responses aside from my POV ahead, it is not bad. But if your just maxing it out and not for that reason, but to rack on points, definitely not bad if you pay the day after or right after the purchase as long as the balance is paid before the statement cuts. i.e. Doesn't matter if you pay a mininum of $25 every two days and then the balance in full before the statement cuts, or the full amount in one payment before the statement cuts. The main point is that you don't let that balance report before the statement cuts, meaning you post a payment at least 2-3 days before you know it is going to cut, so you give the payment time to post to your card to reflect the CL that is available minus your payment, so your card could looked payed off on your CR, or Pif and you leave a small balance on it.!


 

Edit: Sorry for the typos edited my post and made it easier to understand, (didn't re-read before I posted!)
20 Years & 1 Month Young; Total Income: $53k (Credit History): 1.9 years AAOA: 1.0 years
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thirst305
Posts: 39
Registered: ‎03-03-2013
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Re: Maxing out Credit Card then Paying in Full?

I've many times let multiple cards max out and just pay them down over time.  Worst case scenario is that I get CLD, but as soon as I pay off everything typically a CLI will happen, so do what you need to do.  Preferably it's better to not let the maxed out balance report, but if you do, it is not the end of the world.

 

I've had 100k of balance with 90% utilization for 3-4 months. I subsequently paid it off and everything was back to normal.

 

Unless you are about to apply for something, a few points, even 50+ point drop generally isn't the end of the world.

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Valued Contributor
takeshi74
Posts: 2,346
Registered: ‎06-05-2013
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Re: Maxing out Credit Card then Paying in Full?

[ Edited ]

killer_queen229 wrote:

Either way it is bad to max out a card, even close to it even if you pay in full. Never do that.  To a creditor it looks like you can max out a card with the possibility of not paying it back. I wouldn't recommend doing it even if someone disagrees.


That's really not what the OP is talking about.  The OP is reducing the balance prior to statement close.  The card does not report as maxed.  It's not really the usage during the statement period that matters so much as the reported balance.  The reported balance is what is used to determine utilization.

 


killer_queen229 wrote:

But how can you pay a bill when the statement isn't made out yet? That's what I am trying to get at. If the statement isn't posted online, or even mailed to you.. how can you do that? Why pay for every transaction on a card every time you buy something when it's a waste of time. 


OP isn't paying the bill.  OP is reducing the balance after transactions post.  Payments can be made online as transactions post.  Or, if the desire is to pay prior to post, the payments can be pushed using online bill pay.

 

Keep in mind that the "works for me" blade cuts both ways.  You may see it as a waste but others see it as a necessity as their spend would otherwise exceed the ideal or generally recommeneded utilization limits.

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Peter1142
Posts: 346
Registered: ‎08-17-2013
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Re: Maxing out Credit Card then Paying in Full?

Is there no one in this board who knows how the internal scorimg algorithms actually work?  I guess it is all big time trade secrets.

 

In my experience,  racking up debts then rapidly paying them off, is a sure-fire way to show the creditor they should loan you more money.

 

 

 

 

 


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