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New Member
culinandy
Posts: 2
Registered: ‎03-02-2013
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Credit Card for Bills - Affect on Credit?

I have recently come upon enough money to pay off all of my outstanding debt. I've run my three credit reports and everything listed as a negative/outstanding debt will be getting paid off in the next week. While I'm very proud of that, I know I have a long way to go in the process of rebuilding my credit, as I haven't been very good about paying bills on time and have some negative things on my credit report.

 

So here's my question. I have two credit cards, one with a $1,000 limit and one with a $300 limit. Both are high interest, which I am going to try and negotiate down once I pay off the balances. 

 

My monthly expenses for bills is roughly about $700. I get paid every two weeks, so my thought is - everything that can be charged to a credit card, I'll have go onto my $1000 card, and I'll pay that credit card down at least once a month, sometimes I may even be able to pay it twice in the few months where I get paid three times in that month. The $1000 credit card will stay in my drawer and not get used for anything other than bills. The $300 credit card will be in my wallet and only for emergencies where cash-on-hand is running low. I may carry a balance on that $300 card for short period of time if needed.

 

Will this have a positive impact on my credit? Is it smart to do this? My reasoning is two-fold - all of the bills that will varying due dates get auto-paid so I don't forget them, and by paying down my credit card every month I am assuming it will have a positive impact on my credit - my only concern is I'll be charging close to 75% of my total available credit on that card every month, so I don't fully understand how that will get reported.

 

Can someone help shed some light on my thinking and let me know if this would be a good idea?

 

Thanks!
Andy

Valued Contributor
rckstrscott
Posts: 2,659
Registered: ‎04-25-2011
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Re: Credit Card for Bills - Affect on Credit?


culinandy wrote:

I have recently come upon enough money to pay off all of my outstanding debt. I've run my three credit reports and everything listed as a negative/outstanding debt will be getting paid off in the next week. While I'm very proud of that, I know I have a long way to go in the process of rebuilding my credit, as I haven't been very good about paying bills on time and have some negative things on my credit report.

 

So here's my question. I have two credit cards, one with a $1,000 limit and one with a $300 limit. Both are high interest, which I am going to try and negotiate down once I pay off the balances. 

 

My monthly expenses for bills is roughly about $700. I get paid every two weeks, so my thought is - everything that can be charged to a credit card, I'll have go onto my $1000 card, and I'll pay that credit card down at least once a month, sometimes I may even be able to pay it twice in the few months where I get paid three times in that month. The $1000 credit card will stay in my drawer and not get used for anything other than bills. The $300 credit card will be in my wallet and only for emergencies where cash-on-hand is running low. I may carry a balance on that $300 card for short period of time if needed.

 

Will this have a positive impact on my credit? Is it smart to do this? My reasoning is two-fold - all of the bills that will varying due dates get auto-paid so I don't forget them, and by paying down my credit card every month I am assuming it will have a positive impact on my credit - my only concern is I'll be charging close to 75% of my total available credit on that card every month, so I don't fully understand how that will get reported.

 

Can someone help shed some light on my thinking and let me know if this would be a good idea?

 

Thanks!
Andy


Won't matter Andy, in terms of scoring.

 

FICO is a snap shot. So lets say your balance was 45 bucks on your card when your statement cuts, then you charge 700 bucks, and then pay it off to $35 the next month. All FICO sees is the 10 dollar drop, the scoring model does not factor day to day usage.

 

Now, the credit card companies will factor your usage into account, but the scoring model won't.

 

In regards to your own money management, well, only you can anwser that question on if it makes sense for you to do it. I would never put bills to autopay from credit cards, just too dangerous to let it slide in my opinion, if if you overcharge by mistake and a bill or two doesn't get paid, you can incur late fees ect.

 

You SHOULD be proud of paying off that debt, understand however, that paying off negative debt (collection accounts ect) will have NO impact on your credit score. A paid collection is the same as unpaid in terms of scoring. You will want to try to negoiate removals for payment.

 

What type of debt are you talking about?

 

-scott



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guiness56
Posts: 22,408
Registered: ‎01-17-2008
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Re: Credit Card for Bills - Affect on Credit?

Unless you know when the CCC reports to the CRAs it could have a really negative affect on your score.  If you plan on using 75% of the available balance, and for whatever reason, cannot pay it down from 75% your score will be affected negatively.

 

Yes, FICO is a snapshot of what is on your report on any given day and has no memory.  So if it is reported at 75% one month and 9% the next, your score will quickly recover.

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js0319
Posts: 370
Registered: ‎02-27-2012
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Re: Credit Card for Bills - Affect on Credit?

[ Edited ]

I would suggest not going into debt by paying other debt. At that point, it has the potential to turn into a vicious cycle. Do you have the cash in reserves to pay off the debt?


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New Member
culinandy
Posts: 2
Registered: ‎03-02-2013
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Re: Credit Card for Bills - Affect on Credit?

Thanks everyone for the advice. After more consideration, I have come to the conclusion it would not be all too wise to use my credit card for bills as I have described. I think it would be much more wise to have a separate checking account that I keep funded from my paychecks. While some people don't like auto-pay, the rolling due dates and my consistent forgetfulness just makes it the only way can assure things will get paid. 

 

In terms of the things I'm looking to pay off, they are as follows:

Central Finance Control MEDICAL
Central Finance Control MEDICAL
National Acct Systems-DENTAL CENTER
Pinnacle Credit Services VERIZON WIRELESS

 

They are all "In collection" - so I'm assuming PFD is the preferred course of action for these? I've seen the example letters here and think I get the gist of it. I have some collections on my credit that are paid/closed/was a collection - from before I knew any of the proper way to handle these and just paid them. Probably nothing I can do for those, huh?


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