How to best use credit cards to increase score

[bichonmom]

I recently got two Capital One credit cards: one for my biz and one personal (both under my SSN).

The biz card has a $500 limit and the personal one $300.

I am wondering the best way to use them to increase my score in the shortest time. Should I make a charge each month (say $150) and pay it in full each month, or should I make the same $150 charge and pay it off over a few months? Which will have the best effect on my score?

They both have 0% int for a while, but I am NOT wanting to use that as credit. I want to use them to increase my score. Note: These and a One Navy are the only cards I have.

Thank you!

[Chopbrocoli]

If I were you, i would treat your CC's as a debit card and PIF each month. But be sure not to use no more than 20% of your credit limit. 

[glamchick]

what do you mean by not using more than 20%.   You can never max it out and pay it off before the report it?

[trubliever82]

No. IMO Just use no more than $100 on 500 and $60 on $300 every month to get the best out of them. I personally stay around 8-10% and it helps. Remember new lines of credit hurts your score most often times, so keeping low balances will help minimize the negative effect of new credit lines. After say 6 months to 1 year the newness wears off and it helps you more. I'm attempting to get up into the mid to high 700's so I keep all my balances low all the time. NOTE: just cuz u pay it off every month doesnt mean that its going to report a $0 balance

[MarineVietVet]

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@bichonmom wrote:

I recently got two Capital One credit cards: one for my biz and one personal (both under my SSN).

The biz card has a $500 limit and the personal one $300.

I am wondering the best way to use them to increase my score in the shortest time. Should I make a charge each month (say $150) and pay it in full each month, or should I make the same $150 charge and pay it off over a few months? Which will have the best effect on my score?

They both have 0% int for a while, but I am NOT wanting to use that as credit. I want to use them to increase my score. Note: These and a One Navy are the only cards I have.

Thank you!

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Hi there.

Everyone's situation is different and there is no one size fits all approach to this but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[bichonmom]

Thank you for your replies!

I'm a little confused. I'm new at this, so I'm sorry if I'm asking a question that seems to have an obvious answer. 

I remember my grandmother used to use her credit card all month long so she could accumualte mileage on her card, and then pay it off in full each month when the statement came (before the due date... but AFTER she got the statement).She had AAA credit.

If I understand correctly, you're saying NOT to do this because the balance due at the time the statement is sent out will be more than approx 10% of the avail credit.

I'm wondering if this is only something we need to be concerned about when we're trying to rebuild our credit.

Also, I've read on some other posts about "utilization." I don't really understand what this means. What's the benefit to us to use the card throughout the month and pay it before the statement cuts? If we're going to do that, wouldn't it be easier to just not use the card and pay cash or use a debit card? Is there some benefit in terms of our credit score or  history with the credit card company for us to do this?

I'd really appreciate some clarification... or maybe hearing about what has worked for others.

Thank you!

[tntexans72]

I think it's important you show them you have buying power on your Business CC.

Lets say you have $1000 of buying power each month in your savings.

If the limit if $500...I would use the Business CC to $400. Than pay it off right away before the statement show.

Do that again for a total of twice a month and carry a 1% balance when the statement cut. 

Do that consistantly for 6 months, than call in to ask for a CLI.

Cause within 6 months, you have spent $4800 through the card with a CL of $500, that will showed them you need a CLI.

If they don't give it to you at the 6mons, you can start looking for another card through another bank.

If they still say NO at 1yr, by that time, you have build an additional 1yr of AAoA, you can start looking at different cards and apply for one.

And more than likely, you will get a CL of at least $1K somewhere else.

Good luck !!

[bichonmom]

Thank you for the reply.

The biz card says you'll get a CLI after 90 days if you use it and make payments on time. I don't remember the specifics. I think you only have to use it once and make 3 payments on time.The personal card will give a CLI after 6 months under similar terms.

From what you're saying, if I use it more and pay it off before the statement is cut, then I'll get a larger CLI. is that correct?

My concern isn't so much about increasing the CL, though I do realize that will help my score. My main concern is increasing my score.

I know these are newbie questions, so please forgive me if they sound obvious.

Thank you!

[tntexans72]

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@bichonmom wrote:

Thank you for the reply.

The biz card says you'll get a CLI after 90 days if you use it and make payments on time. I don't remember the specifics. I think you only have to use it once and make 3 payments on time.The personal card will give a CLI after 6 months under similar terms.

From what you're saying, if I use it more and pay it off before the statement is cut, then I'll get a larger CLI. is that correct?

My concern isn't so much about increasing the CL, though I do realize that will help my score. My main concern is increasing my score.

I know these are newbie questions, so please forgive me if they sound obvious.

Thank you!

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Your score will increase over time as long as you have no lates, degrogs, etc....

But once you established credit by getting a CC....it's all about CL and CLI.

The higher you can get your CL, the more buying power you have. Just use it responsibly and don't abuse it.

Over time, your score will increase if you keep your util low, AAoA takes effect, no lates, derogs, and not too many hard IQ from trying to obtain new CCs.

The higher you can get a CLI on your current cards, your more likely to not try and obtain new CCs to get a higher CL IMHO and trying to obtain new CCs can hurt your score. Hard IQ will hurt your score.....and it's a marathon, not a sprint when it comes to the Fico scoring world.

[bichonmom]

Thank you, Texas. I'll focus on increasing the CLs.

Could someone please explain "utilization" to me... or refer me to a post where it's explained.

I'm still worndering if there is a benefit to using the card and then paying it off before the statement, and what that benefit is. If I understand correctly, you're saying that if you use the card a lot but pay it off before the statement, then you'll get a larger CLI, which will in turn increase your score. Is that accurate... and is that what's meant by "utilization"?

Thanks you!