What is the general rule for paying credit card balance?

[SamsungHDTV]

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@Anonymous wrote:

I recently opened a credit card. It is my first card, and for last months statement, I paid off the card in full. The total balance was only 200 dollars, and the mininum payment was 25 dollars. After I made my payment I noticed my score went down 17, 4 & 7 points on my Experian, Equifax and TransUnion respectively.

Is there a general rule to paying off your credit card balance?

Thanks!!!

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If you're new to credit, you're in the right place to learn about it.  I wouldn't worry too much about micro managing your credit. You'll be just fine paying the balance off in full as long as you continue to never miss a payment. You probably still want an explanation, so I'll continue on.

If you still prefer to manage your credit this closley, then I read most the time anywhere from 1-9% utilization (know this term and how its calculated) reporting is ideal. So at 1-9% on a 200 dollar credit limit, you want anywhere from $2-18 dollars reporting. I realize that $200 was your outstanding balance and not your credit limit, but I hope that answers your question.

However, I don't think you're asking the right question. What you want is, "how much should I have reporting on the credit report?" If you're seeing $25/200 (minimum payment/outstanding balance), then $200 is what is reporting on your credit report. Doesn't matter how much you pay it, it matters when you pay it. Guessing that your limit is perhaps $500 (because its your first card), your utilization is 200/500 = 40% (which is high). Again, 1-9% is ideal, anthing above 20% you'll probably lose a few points, and yours at 40% is high.

So when should you pay it? The answer - before your statement closes. Whatever balance the statement closes is what reports to the credit reports. In your case $200 showing on your reports, which is really what brought you down a few points. It wasn't because you paid in full. If I were you and you wanted to have $0 reporting then make the full payment before your statement cuts.

So in your example, I would pay full balance a couple days before the statement closed or $185 and $15 would report (if you wanted to micro manage). Your bill would look $15/15 (min payment / outstanding), and then pay off in full to avoid the little interest charge. Your report would then look 15/500 = 3% utilization, nice. But again, I wouldn't worry about this and just pay off in full.

Hope this makes sense.

[Anonymous]

Hi Samsung,

Thank you for your thoughtful response! The credit limit for the card is $250 dollars. Here's the details from the myFICO note:

Utilization Percentage

10% --> 0%

Balance Amount

$26 --> $0

In this instance, should I have kept 2% of the credit limit as the balance? I'm stil very new to credits cards. I've only had the card for 3 months now.

Regards!

[SamsungHDTV]

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@Anonymous wrote:

Hi Samsung,

Thank you for your thoughtful response! The credit limit for the card is $250 dollars. Here's the details from the myFICO note:

Utilization Percentage

10% --> 0%

Balance Amount

$26 --> $0

In this instance, should I have kept 2% of the credit limit as the balance? I'm stil very new to credits cards. I've only had the card for 3 months now.

Regards!

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It depends on what your main goal is. I mean if you wanted to have the best score possible at all times, then yes the idea is to let 1-9% report. But again I wouldn't worry about it. You don't need to micro manage your score at this point. In 2 years time, you'll likely have at least another card or two. All of them you would have never missed a payment and it wont be a deal breaker if you have 0% utilization or 1-9% utilization reporting. It will matter if you have a high utilization though.

[Anonymous]

Thanks again Samsung! I really appreciate the help! I'll keep this in mind moving forward with my card.

[JSS3]

You have 2 cards. One of the 2 must report a balance to the credit bureaus for optimal scoring.

Let's say your first card has a $500 limit. The due date for that card is 3/3/15. The closing date for that card is 3/6/15.

Lets say the second card has a $700 limit. The due date for that card is 3/2/15. The closing date for that ard is 3/8/15.

You decide to leave the balance on the $700 card. Spend as much as you want to on the card but pay it all down to $70(or less) by 3/7/15.Your statement will close on 3/8/15 and be available by 3/9/15. You will then see that there is a new minimum payment due for 4/2/15. You can go right then and pay whatever you left on the card(<$70). 

Your first card with the $500 should all be paid in full by 3/5/15.

*Whatever you decide to do, ALWAYS pay atleast the MINIMUM of $25-$40 by the due dates. 

[Anonymous]

Hi JSS3,

Thank you for your help. This is starting to make more sense to me now. What confused me was the fact that my credit score dropped when I payed off my balance. I see that I'll need to show that there's a small balance in my account so that it shows I'm using my credit.

Regards!

[Jerry45]

KDM is right. It is the 3 Hard Pulls from Cap One bringing your score down

[JSS3]

No problem.

You can always call up Cap1 and Chase and ask when your statement closes. You can also look at the dates for the last 3 months when new statements became available. From dealing with both, statements close 3 days after due date.

Whenever you see the minimum reset, and the next month, that tells you the CCC(credit card company) came through and collected all info to send off to the bureaus.That billing cycle is now closed. This is the green light to pay off the remaining balance or just the minimum due.

I currently have a balance transfer that just posted from 4 cards to one. The negative is it will report with 67%. The positive is all other 13 cards will be at 0. My overall UTIL will be 14%

My score should raise some, but not all that much since I have over 30% on that one reported card.