New Credit Card User

[clewis122]

Hi!!

I'm a new credit card user looking to build a positive repayment history & improve my overall credit score. My CC statement is cut on the 7th of each month & my bill is due on the 3rd.

I need some clarity on what exactly a statement being "cut" means. Does the CC company report to the credit bureaus on the same day the new statement is cut? How should I handle the bill payment when I want some utilization reported to the bureaus?

[Anonymous]

Almost all credit card companies report to the credit bureaus on the day that that the statement is cut or thereabouts.  The amount that is reported is the "Amount owed" on the statement.   You may want to reach out and ask your credit card company if you want to be 100% certain.

If you want the card to report the full amount that is on the statement, it's pretty easy.  Just wait till after the statement cuts, and in the next few weeks pay it off.  Personally I would recomend that you pay the amount in full, or otherwise you will be paying interest.  There is no FICO benefit to you paying interest -- none.

If you want the card to report a positive balance, but you also want to keep that amount small (thus keeping your "utilization" % very low) then you should make a payment five days or so before the statement cuts, paying the balance down to a small amount.  Just be sure to make another payment maybe a week after the statement cuts so that you are paying the amount in full.

Way down the road, when you have multiple credit cards, you will occasionally want to make sure a particular card reports as $0.  It's the same principle as making it report a small balance, but you just pay the whole thing off.

An additional strategy you should explore is setting up "autopay" -- this cause the card to debit your bank account if you haven't yet made a payment by the due date.  It's a nice feature because nothing will cause you more harm than negative payment information -- late payments stay on your credit report for seven years.

It sounds like you have only one credit card right now.  Is that right?  If so, part of your plan during the next year or two should be to add a few more credit cards.  That will help you get a much higher credit score.

[clewis122]

CreditGuy, thank you for all the useful information!! I currently have 2 CC. Credit One (300 Limit) & Capital One Secured (200 Limit). I've applied to & been denied by Capital One Platinum Visa, Discover, Barclay, Victoria Secret & Walmart. These inquiries are hitting hard & I don't want to do anymore damage.

EQ: 600 & 2 collections that are due to fall off next month. Capital One has yet to report.

TU: 610. No collections. Neither CC has been reported.

Any advice??

[Anonymous]

Sure, happy to help.  I am sure you can get advice from other folks too.

It sounds like you have some negative items on your credit reports.  These are sometimes also called "derogatories" or informally "baddies."  These include collections but also include late payments, charge-offs, judgments, liens, etc.  Are these two collections the ONLY negative items that could be on your reports?

You mention your TU and EQ reports.  Are you using Credit Karma as the service for getting your reports?  If so, is that also where you are getting your scores as well?

Your decision to not apply for any more credit cards for a while is very wise.  As you say, you have a whole slew of inquiries and it may be a good idea to wait until many of them are no longer affecting your credit score.  Can you tell me roughly when the inquiries were?  Don't have to be exact.

As touches your two existing cards, the best thing you can do during the next six months is to use each one for small purchases, let the statements cut, and then pay in full a week later.  Although I have never used Credit One, you are probably aware that there are various fees associated with the card: an annual fee, fees for making express payments, etc.  I encourage you to make sure that you have researched what all these fees could be so that you are never surprised by any of them.  You should also develop a game plan on how you hope to close the card eventually, when its FICO benefit becomes not worth its expense.

While you are just building your credit history with the cards, you don't need to worry about your credit card utilization, as long as you are keeping each card away from being maxed out.  When you get to a place where you are ready to apply for your next card again, you should pay one down to $0 and the other to maybe $10 or so before each reports.  That way you will have a low utilization, which will raise your score a lot -- that happens as soon as the new balances both report.

Over the next six months or so (possibly longer) you should work on understanding everything on your credit reports and seeing if you can get them free of negative data.  You should also apply for no more credit cards.  When you do apply for one more, it should be done because you have researched the card you want and are getting one you really think you will use.  Don't worry about credit limits for a while.

[takeshi74]

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@clewis122 wrote:
These inquiries are hitting hard & I don't want to do anymore damage.

EQ: 600 & 2 collections that are due to fall off next month. Capital One has yet to report.

TU: 610. No collections. Neither CC has been reported.

Any advice??

---

It's not really the inquiries.  It's your credit profile.  Inquiries are a relatively small factor so if you're seeing a major impact from inquiriies that's generally a sign that you have some work to do on your credit profile.

If you have any dergos you should generally work on addressing them.  While derog usually taper off as they age they can have a major impact and hold one's scores down.  These items are typically significant red flags to creditors.  You really want to aim to have no derogs and 100% Payment History as these are major factors.  Hit the Rebuilding subforum and carefully research.

Don't overlook your Experian report.

I'd still suggest keeping an eye on revolving utilization.  It's not just a scoring factor but a risk factor as well.  It's tricky with low limits but try to avoid exceeding 30% for prologned periods of time.  You can get into trouble well before you max your cards no matter what the limits.

[Anonymous]

Hi Takeshi74!  You write:

"... try to avoid exceeding 30% for prologned periods of time.  You can get into trouble well before you max your cards no matter what the limits."

I know you are really experienced, so I'd like to hear you expand a bit more on the kind of trouble you foresee if the OP were to be in the vicinity of (say) 40-70% for four consecutive months (but always paying in full).  It sounds like it is not a concern for the OP's score, since I am guessing you agree that the score would get all of its utilization points back when the OP brought it down to 1-5%. 

Note to the OP:

Takeshi74 is absolutely right that the biggest hit you are currently taking to your score is your derogs (two collections and possibly others).   This is why I emphasized you really needed to focus on identifying what any and all of those could be (as well as the timeline for them to fall off).  That said, your derogs are what they are and the 6-7 recent inquiries are lowering your already low score, so that's why I suggested you were wise to stop adding more.

You have the tools now to control your utilization (the information I gave you on how to control what your cards report to the CRAs).  There's certainly no benefit to you in having your utilization in the 30-70% range, so if you want to keep it low every month you certainly can.  It's just that the scoring benefit you get from having a low overall U (say 1-5%)  is something that happens all at once.  In other words, from a scoring perspectrive, if you have a 50% U between now and February, and then lower it to 5%, you will end up with the same scoring benefit in March as if you kept it at 5% the whole time.