beyond confused on how this all works

[Anonymous]

So, I am pretty new to the credit game and my scores are absolutely horrendous. I am trying to clean up the mess I have made but encountering difficulties since I do not fully understand how to manage credit.

My current scores are 629 equifax, 602 transunion and 611 for exp. This is a rebalnace from last month when equifax was 638, transunion 602 and exp 603. 

I originally messed up my credit because I had opened 3 credit cards: with express, VS, and capital one. I didnt understand credit cards back then and I have greater than 120 days not missed on all those accounts and they all went into collections. I paid off the collections and the accounts were closed in 2011. 

Since then, I decided I needed to clean up my history if I ever wanted to buy a house, even rent. One of the suggestions was to apply for credit cards which I did. I currently have a credit one cc with a 300 dollar limit which shows a 0 balance and two secured cards. one from fnbo for 300 and open sky for 200. Last month I had a balane of 29 dollars on the fnbo and i paid it off in full (actually I ended up paying more than owed to the credit company and the new balance was -40.00) but my score dropped from 638 to 629?? 

I am pretty sure I have no idea how to use credit cards which is why my score is dropping. Usually, I buy something with my credit card and pay off in full (usually i pay a few dollars more than owed so i wont acquire interest) before the statement cuts. Is this wrong? How should i be using credit cards and paying them? My amount owed is always 0 and minimum is always 0. 

I also have a finger hut account for 600 and bought something for 163 and again before the statement cut (statement still has not cut)  i dropped the balance down to 133 and was thikning of paying it off but I am not sure anymore what is the correct approach. Fingerhut account is new and has not reported yet. My report has 11 inquiries. I do not have any installment loans because I do not need any.

any advice would be great. I have always used a debit card in the past and therefore using credit cards is a complete mystery to me. Thank you all in advance 

[Anonymous]

I forgot to add. my score dropped for transunion and equifax because they are reporting that my fnbo balance has decreased by $0 whereas experian increased a few points because fnbo is reporting a $0 balance? I have a $0 balance but why is it that equifax and transunion are still showing a balance i have not paid where exp acknowledges that i have paid? 

[Anonymous]

Hi! I'm new too. So far, I've noticed if I can make sure I pay in full on all cards and let one report at 10% utilization, then pay in full the next day, my score alerts go off 30 minutes later of a score increase because my balance cleared. Just diluted the bad stuff with good credit history, and using credit cards for every day purchases and living with in your means are easy way to do that. 

[Exonumist]

Your number one priority should be to use credit responsibly. That means you only charge what you can pay for. From what you wrote you're already on the right track. As far as the utilization game goes don't even worry about it until your planning on apping for something. At that point in time the month before you would make sure that all accounts, but one are paid down and reporting a zero balance. The last account should be anywhere from 1-10% for optimal scoring, but up to 20% is fine. the exact percentage that is best is different all the time. If I let too little report my TU score drops about 20 points. There is no exact science and this forum leads you to beleive that you have to do things exactly one way. As long as you pay your bills on time and don't go into debt you will have an acceptable score. It really is that simple.

[Jaylima91]

Let me explain how some lenders may see you. 

Let me start off by saying congrats on your return and interest in rebuilding your credit, thats a step that most people don't bother taking anymore until they see they can't apply for a loan, period. Although Zero balances being reported to the CRAs are good, in your case it may not be helping you. Why? Well, simply because you have just three CC with very small limits and those I'm sure are new CC. Lenders look at your CR when applying for new credit and will see Zero balances all across the board and say "Well, he has three new CC with Zero balances. Doesn't seem like he uses any credit whatsoever. I don't think we would benefit from him having our card" 

Now, if you had about five or more cards with at least 6 months to a year of history and maybe 2 are showing zero balances, lenders see that differently. They see you use your CCs but of course those two that have zero balances and small CLs are useless to you. And they completely understand that. As long as your CR is free of collections, BR, liens, etc. they will consider you as a prime borrower that utilizes credit and they would benefit from you. 

Also, try not to overpay. That may also be dropping your CS. Pay in full every cycle and allow a very small balance to report to the CRAs.

[twist7d7]

i second the advice above me

[Themanwhocan]

This is my post on the subject:

http://ficoforums.myfico.com/t5/Credit-Cards/How-do-I-play-the-1-9-Utilization-Game-Please-Help/m-p/...

[Anonymous]

Thank you all for your advice. I guess what I am trying to do is flush out the bad with the good and so far have 5 lines of credit. I'll keep on those for the next two years and see how it goes from there. Im not looking to apply for a loan of any kind until atleast 3 years from now but thought by that time I should have a decent enough credit history to be approved. I'll stop over-paying and out of the 5 credit cards i'll let 3 report a balance. Thank you again for your invaluable advice. Much obliged

[Anonymous]

this may be irrelevant. But i contacted the bank that issued the two store cards i was delinquent on and had paid settlements for. They re-opened those accounts and the credit limit. (I was hoping that it may help with my overall average age of accounts). Don't know if that was the right thing to do but its done. 

[longtimelurker]

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@Jaylima91 wrote:

Also, try not to overpay. That may also be dropping your CS. Pay in full every cycle and allow a very small balance to report to the CRAs.

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Why do you think overpayment drops your credit score?