Question about utilization and reporting

[tennmom]

My husband and I recently figured out that in order to rebuild our credit we needed to use credit. We had no credit cards so in the last month we acquired

Me: NFCU cashrewards $1000, Walmart $150, Cap 1 Platinum MC $500 - $400 balance, Barclaycard Rewards MC $750 - $60 balance

Him: NFCU Visa Platinum $6000, Cap 1 Platinum MC $500 - $55 balance

I was under the impression that we should use them so I almost maxed out my cap 1 on groceries fully intending to pay it off before the bill is due, but after doing some reading it appears that this is not the way to do it. We had a plan to just put everything on the cards and then give them our paychecks. We have obviously been completely irresponsible in the past and we are trying to do it right this time but we are both terrified of having those credit cards.

So I guess my question is- does the balance report regardless of whether or not we pay it in full before statement date? Is that $400 on my Cap 1 going to hurt me? It will be PIF next week.

Also - if we add each other as authorized user will that help us out as far as utilization goes? And will these cards grow with time and use? We are done applying, just wanted a decent start. We were shocked we didn't have to go the secured route!

Thanks Everyone!

[rckstrscott]

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@tennmom wrote:

My husband and I recently figured out that in order to rebuild our credit we needed to use credit. We had no credit cards so in the last month we acquired

Me: NFCU cashrewards $1000, Walmart $150, Cap 1 Platinum MC $500 - $400 balance, Barclaycard Rewards MC $750 - $60 balance

Him: NFCU Visa Platinum $6000, Cap 1 Platinum MC $500 - $55 balance

I was under the impression that we should use them so I almost maxed out my cap 1 on groceries fully intending to pay it off before the bill is due, but after doing some reading it appears that this is not the way to do it. We had a plan to just put everything on the cards and then give them our paychecks. We have obviously been completely irresponsible in the past and we are trying to do it right this time but we are both terrified of having those credit cards.

So I guess my question is- does the balance report regardless of whether or not we pay it in full before statement date? Is that $400 on my Cap 1 going to hurt me? It will be PIF next week.

Also - if we add each other as authorized user will that help us out as far as utilization goes? And will these cards grow with time and use? We are done applying, just wanted a decent start. We were shocked we didn't have to go the secured route!

Thanks Everyone!

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Your utlilization is based on what reports on your statement compared to your limits. You could use your card 100 times, and charge 70000 dollars, but the only thing that matters to FICO is what the company reports. So if you pay it in full before the statement, it will show a 0 balance. FICO likes to see SOME balance.  A low balance on at least card.

You want to keep the reported balances at a total under 10 percent. My best FICO score comes when I have all my cards with no balance, and one showing about 5 percent or so.

The flip is, the more you use your card; the more likely you will get increases. So you have to juggle. Just make sure it reports a low balance total for maximum points, but even if you didn't your score will recover as soon as you pay down you balances. I had to carry high balances for a couple months after I bought the house, and my score dove... but I knew that if I paid them down the score would rebound.

Adding authorized users will definitely help your FICO score when you are starting; it could pose issues down the line when applying for a mortgage cause some lenders feel that inflates the score, and it does. But cross that bridge later; they are easy to remove.

Cap1 won't grow too much. They are kind of stingy. I got mine to grown from 1k to 2k, but that is it.

The NFCU will grow great. You are well on your way to success here

-scott

[guiness56]

Whatever the balance is on the day they report is what gets reported.  If you maxed out your card and it is reported that way, then it will hurt your score.  Once for the card being maxed out and second, if it applies, for high utilization.

[tennmom]

Thank you!

I was guessing that it would take me a few months to get it down to a science and figure out when they report etc. I had read somewhere that it wouldnt matter if I charged it then made an immediate payment they would report the largest balance. but I guess that is false unless they report in between the time i charge it and the time i made a payment! If my score would likely rebound it would probably be okay to let i ride while I figure it out. Thanks to NFCU we wont come close at all to maxing out our cards so that should help big time.

I know that we are going to have to carry a balance on one card due to some car repairs but the ultimate goal is to raise our scores by Jan/Feb to get one of our cars at 17% refinanced. So if it wont be a hard to recover from the hit while I am in this learning curve i wont stress out about it now and just worry about PIF as much as I can.

The Cap 1 mentions credit steps and automatic increase by 7th cycle, but I am guessing it will be a small increase.

Our ultimate goal is mortgage by end of 2015 - so not so worried about meantime just slow and steady. Still have a few negatives that we are trying to get rid of.

[guiness56]

CC generally report on the statement date or a day or so after.

[bluescale]

Keep in mind, if you're not applying for anything right now, you don't need to worry about your FICO score too much.  Spend the next few months building good habits (i.e., paying off your credit cards each month so you don't pay any interest).  Then, in the month before you want to refi, use targeted tactics to maximize your FICO score.

My recommendation is not to use the cards too much at first.  Set up some automatic payments that you have to pay every monthm (netflix, internet, cell phone, etc...), and then pay them off as they post.  When my wife and I started using credit cards again (we went 4 years without them due to a great deal of irresposibility prior to that), we avoided anything that wasn't a set expense.  We even avoided charging groceries because we knew we wouldn't be as price concious if the money wasn't coming out of our bank account immediately.

Now I try to maximize rewards somewhat, although not nearly as much as others on this board.  I look at credit cards like gambling or alcohol - what starts out as fairly responsible usage can quickly spin out of control.  One day I looked up and had $45k in credit card debt.  I'm not exactly sure how I got there, but it was there, and there wasn't enough money to even pay my minimums and still make the house payment.  I never want to be in that situation again.

[tennmom]

YES! I am a strict budgeter now and every last penny we make has a specific place it has to go. My husband has already tried to buy some frivolous things, that although aren't a lot they are not needed and are not in our budget! I am going to be a stickler about it. Getting back into debt is not going to get us our house! And yes it is kinda like gambling and alcohol! I never thought of it that way until now.

Thank you!